Turnaround of JC Penny
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Case Details:
Case Code : BSTR160
Case Length : 15 Pages
Period : 1990 - 2005
Organization : J C PENNEY
Pub Date : 2005
Teaching Note : Available
Countries : USA
Industry : Retailing
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"In the march of years, however, the emphasis widened to
include a variety of other businesses as the stores swelled with an
ever-increasing range of merchandise including an emphasis on value fashions.
With those changes, the difference between JCPenney and its competitors
narrowed"1.
- Bill Hare, 'Celebration of Fools: An Inside look at the
rise and fall of J C Penney,' Amacom, 2004.
We are very pleased with the improvements we continue to
achieve in our business. Our (2004-05) results reflect the impact of effective
merchandising programs, including transition of seasonal product, compelling
marketing and continued improvement in the shopping experience in our stores.2
- Myron Ullman, Chairman and Chief Executive Officer, J C
Penney Company, Inc. in 2005.
Introduction
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J C Penney Company, Inc. (JCP), a leading retailer in the US
with a century of experience behind it, found itself unable to keep pace with
the changes taking place in the retail environment in the late 1990s and this
showed on its performance.
Return on shareholder equity came down to - 8 percent in 2000 from 20 percent in
1994 while earnings before interest, taxes, depreciation, and amortization came
down from 9 percent of sales in 1996 to about 3 percent in 2000. In 2000, JCP
stock plunged below $10, resulting in the company losing its investment-grade
rating.
The company thus had to go through a restructuring program starting 1999-2000.
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As part of this program, JCP centralized its buying process, sold off the
Eckerd drugstore chain that it owned, aligned its HR practices with its
business goals, and tried to position itself as a trendy yet value offering
retailer.
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And these
restructuring initiatives proved to have been the right move.
They started showing results in the early 2000s. JCP's income from continuing
operations increased to $328 million in 2004-05 from $253 million in
2003-04. The value of JCP stocks improved from $10 in 2000 to almost $50 in
2005.
Background Note
The history of JCP can be traced back to 1902 when
James Cash Penney opened The Golden Rule, a dry goods and clothing
store, in Kemmerer, Wyoming, in partnership with his employers,
merchants Thomas M. Callahan and William Guy Johnson. |
Turnaround of JC Penny
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