Investors in J.C. Penney (NYSE:JCP) have had to deal with years of volatility as the stock has lost a huge amount of ground during the discount retailer's various attempts to reinvent itself. Lately, though, CEO Marvin Ellison has taken the reins, and he recently told attendees at the 22nd Annual Global Retailing Conference about J.C. Penney's strategy for putting together a lasting rebound. Below, you'll find eight of Ellison's comments that shed some light on the retailer's overall strategy going forward.
1. "On the art side of retailing, ... I would argue that J.C. Penney is as good as any mid-tier retailer in our competitive space. ... Where we have huge opportunity is in the science of retailing."
Ellison thinks that store presentation, layout, esthetics, and customer service are all areas of strength for J.C. Penney. Where the company can do more, though, is in analyzing and optimizing pricing, supply chain, and marketing to bring Penney more in line with its rivals. By bringing in new talent and considering new ideas, Ellison is pushing forward to make Penney strong in both areas.
2. "Where customers are rather agnostic about a specific brand, the question we will ask is can we create a private brand that creates a more profitable position for us while giving the customer a better value?"
Private brands can boost margins compared to reselling outside brands, but J.C. Penney has to walk a fine line with its brand management. Ellison intends to look at each brand and nurture those where the relationship is mutually beneficial while looking for private alternatives when it can do so in a way that's better for its business and its customers.
3. "The one thing I've said pretty consistently is that we have no expectation to try to recreate a pre-2011 J.C. Penney."
Some believe that J.C. Penney is trying to forget the failed experiment from former CEO Ron Johnson and recast itself in its prior niche as a discount retailer. Yet Ellison notes how this isn't an option for Penney either, as the market has changed and Penney's opportunity to lead it no longer exists. Instead, Ellison realizes that he has to build on Penney's history while creating something new with staying power for the future.
4. "Launching the Strahan collection of Michael Strahan for us is an example of having a brand that resonates with a broader demographic of customers."
Ellison realizes that Penney has a solid customer demographic that can be appealing to potential suppliers in the fashion industry. Pointing to former football player Michael Strahan, Ellison noted that the combination of a classic style and an attractive price point gives Penney some leverage in making smart partnerships. As Ellison focuses on millennials, investors should expect more of these efforts from Penney.
5. "Our marketing spend and our ability to target customers historically has been very poor. ... We're going to spend a lot on making sure that we are effectively communicating with the customer."
Penney has had some success in boosting the effectiveness of its marketing, reporting that it spent less on advertising but got more impressions in exchange. By using more progressive communication methods, Penney thinks it can get more from less and drive greater sales over the long run.
6. "We're working very hard to redevelop more efficient ways to localize our stores from an assortment standpoint."
One thing about national retail chains is that what works in one store often doesn't work in another location. Penney historically did well at localizing its stores to cater to local demographics, but Ellison said that the company has lost some of its prowess in doing so. Nevertheless, he thinks that Penney can get that expertise back and offer clothing that appeals to all of its shoppers.
7. "The great thing about Sephora is that it's performing across all store types."
Penney's strategy to offer in-store shops from outside vendors has done very well, with Sephora being the most obvious success story. What surprised Ellison, though, is that Sephora has performed well beyond big-city locations. The CEO pointed to a West Virginia location as an example of how a rural-area store benefited from a Sephora in-store location, and Penney hopes it can duplicate that success throughout its network.
8. "We currently are not looking at or entertaining any REIT or any initiative with our real estate."
Other struggling retailers have looked at using their extensive real estate lease holdings to bolster their finances, either by restructuring as real estate investment trusts or by spinning off those holdings. Yet while Ellison sees some potential in a possible real estate optimization, he sees other items on his to-do list as having priority right now.
Penney has a long way to go, but its CEO has a clear vision for the future. If it works out well, then Penney could be an impressive long-term turnaround story for patient investors.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.