In an effort to cope with a weakened economy and recession-conscious consumers, J.C. Penney today revealed a “bridge plan” that involves significantly cutting its expenditures.
The department store retailer, based in Plano, Texas, said it has pared down its capital expenditures budget for 2009 to $650 million, which is drastically below an estimated $1 billion for 2008 and $1.2 billion in 2007.
“We have just completed our strategic planning process for the coming year, a period that we expect to remain very challenging for the American consumer,” Myron Ullman, chairman and CEO, said in a statement. “In light of this, we are taking additional steps under our Bridge Plan to effectively balance support of the merchandise and marketing initiatives that differentiate J.C. Penney with the goal of maintaining a strong financial position.”
J.C. Penney will primarily cut back on new store openings and remodeling operations. In 2009, the company plans to only open 20 new stores, versus 36 by the end of this year. Previous plans involved 50 new store openings each year through 2011. Additionally, only 10 to 15 stores will be renovated in 2009, down from a prior goal of 60 renovations each year through 2011. The company expects to remodel 20 stores by the end of this year.
In a similar move, J.C. Penney said that it will now be cutting down inventory levels to be “in alignment with sales expectations,” implying a much more conservative merchandising strategy moving forward. Despite expected sales decreases, the company hopes the new strategy will improve year-over-year margin trends in the third and fourth quarters.
“We believe that the combination of our merchandising, marketing and pricing programs, together with our prudent capital expenditure plans will allow us to minimize the impact of the difficult retail environment and improve both our competitive positioning and market share,” said Ullman.
J.C. Penney spent $362 million on advertising in 2007, excluding online, per Nielsen Monitor-Plus. A company rep said marketing efforts would remain intact and “an essential part of our long range. Going forward, we plan to be much smarter and more strategic in our marketing spend.”