It's another blustery day this past February, and J.C. Penney's evp/CMO Michael Boylson is addressing a group of fellow marketers and agency executives at the annual Retail Advertising Conference in Chicago. Boylson is speaking intently about his company of 26 years, highlighting his plans to make J.C. Penney's Internet operation a key facet of its image rebuilding process.
A week later, Boylson is working a room packed with New York's glitterati at the Four Seasons restaurant. He is using the fashion show portion of the evening to unveil J.C. Penney's nicole by Nicole Miller designer collection and six saucy new TV spots that aired on Feb. 27 during the Academy Awards telecast.
One might not expect a J.C. Penney marketer to have much to say on the subject of technology, fashion or branding. But this is not the vanilla J.C. Penney we grew up with, or the humble Midwestern retailer our kids may know.
A staple of the American department store landscape for more thin1 100 years, J.C. Penney is where shoppers went for value packs of Hanes underwear or a pair of sensible shoes. For those bargain hunters,J.C. Penney's "brand" was of lesser concern than the price shoutouts on its Sunday circulars.
"Today, consumers who are not yet sold on the "new" and more fashionable J.C. Penney may step onto its floors to find an inviting selection of merchandise and a well-edited assortment of clothing" that promises both style and value. There are still good deals on Dockers and BVDs, but young women in particular are more likely to be drawn to that animal print halter top from the flirty Bisou Bisou collection, slim-fitting Mixit velvet jacket or a pair of trendy Arizona jeans.
As J.C. Penney continues to sell America on its hip new look, it has racked up consistent mid-single-digit sales increases at its department stores in an age when growth in that channel is increasingly difficult to come by Comparable store sales for the year ending Jan. 29, 9005, increased 5% over the previous 19 months on total revenues of $18.4 billion. The company continued its momentum with a similar 5.4% overall sales increase in the second quarter of this year.
Much like Target did for big-box retailers in the '90s, J.C. Penney is propping up the midscale department store by offering affordable luxury to younger, style-conscious customers. In contrast to the wave of consolidation that spawned the Sears/Kmart mega-merger and Federated's recently completed $11.9 billion takeover of May Department Stores, J.C. Penney's comeback is arguably a triumph of marketing over the notion that lower prices are the only answer to Wal-Mart.
"We are a promotional retailer, and although we like to lessen our dependence on sales promotion, that is a critical part of driving store traffic," cautioned Boylson. However, he added, "We're trying to change the perception of a 103-year-old brand, which is the most strategic thing."
When he became CMO in April 2003, Boylson's challenge was to transform the company into a modern retailer that relied not only on sales and promotion, but on branding.
With a budget in excess of $1 billion, Boylson has seamlessly executed a turnaround plan that began in 2000 under CEO Allen Questrom (who was replaced in January by Mike Ullman). Having watched its stock price plummet below $10 per share that year (it's now close to $50), the company centralized operations and streamlined inventory management, closing more than 100 underperforming stores, remodeling others and opening 10 new off-mall formats. Last year, it sold off its Eckerd drugstore chain, using some of the money to eliminate $1.7 billion of debt.
Meanwhile, J.C. Penney began launching proprietary brands and a new marketing platform with the now-familiar tagline (cue lilting music): "It's all inside."
In 2004, Boylson, 50, helped record a breakout year with J.C. Penney's fourth consecutive annual earnings increase--a satisfying result for the career Penney exec, who joined the company in 1978 as a selling specialist in its Niles, Ill., store.
"When I came into marketing, I found that knowing every other area of the company so well made it very easy to connect the dots," said Boylson.
Those who've worked with Boylson agree that his experience at the store level has proven invaluable in his latest role.
"Because he has such a deep legacy with the organization, he has seen a lot of ideas over the years and has a pretty strong sensitivity as to what he thinks will work and what won't," said David Polston, svp at J.C. Penney agency DDB, Chicago. "Once he buys into an idea, he becomes a tremendous advocate for the organization in helping to sell it across the entire franchise."
Mark Mears, a former director of sales planning and promotions at J.C. Penney and now CMO at Blimpie, concurred.
"Mike's forte is that he understands merchandise and the J.C. Penney system, so he is better able to coordinate the marketing efforts to maximize the return on investments," said Mears. For example, he credits Boylson with helping J.C. Penney reap its fair share of co-op dollars from marketing partners for its weekly circulars.
Boylson's hard work enables him to project a no-nonsense image that suits J.C. Penney perfectly, added Mears. "He's a roll-up-your-sleeves, get the job done, substance more than style kind of guy," he said. "In J.C. Penney's culture, that is what was needed, which is why he's been so popular and effective."
Central to J.C. Penney's renewed vitality is the growth of its private label business, which accounts for 40% of total sales. Its stable of apparel private brands includes the billion-dollar Arizona jeans collection, Stafford tailored clothing line, Delicates intimate apparel, Worthington career wear and St. Johns Bay sportswear, as well as the Chris Madden and Colin Cowie home collections. Access to such affordable products means more middle-class shoppers are trading up at J.C. Penney.
"Regardless of age or income, people aspire to a better quality of life," said Boylson, noting that the average annual income of J.C. Penney customers is between $35,000 and $85,000. "We know that 98% of Americans trade up in at least one category, and we believe our private brands deliver [those trade-ups] at a smart price."
Industry observers laud his private label efforts. "J.C. Penney suffers to a certain degree from its past image of 'this is my mother's or grandmother's store,'" said Robin Lewis, who runs a fashion consultancy in New York. "But they're elevating the style of the apparel and increasing the lifestyle presentation in the stores."
J.C. Penney has made additional inroads with the elusive young male market with Arizona jeans and nick(it), a British-inspired collection that launched in March via Nick Graham, the colorful designer behind the Joe Boxer brand. At least one analyst believes the hip new duds will draw some teen customers away from the likes of Abercrombie & Fitch.
"They're performing well in youth apparel," said Rob Plaza, senior retail analyst for Zacks Investment Research, Chicago. "Getting kids into the store ... is bringing in apparel that is more fashion-forward and updated J.C. Penney's image, especially with a younger consumer who may have gone into Abercrombie."
This summer, J.C. Penney united its five core private apparel brands under a new marketing umbrella led by vp Laurie Van Brunt, director of brand development. Now, instead of having those brands report to product development, her group works directly under Boylson at the company's headquarters in Plano, Texas.
This fall, J.C. Penney will launch its newest private label collection, Solitude, developed by former surfing world champion Shaun Tomson. Solitude will launch in 90 resort locations this November, followed by a wider rollout next February (see related story, page M28).
Even as J.C. Penney draws more shoppers through its doors, it is banking on the Internet to keep the brand at their fingertips 24/7. Most retailers today have an online operation, yet J.C. Penney goes further by communicating its multi-channel offerings in newer stores with signs and a customer service area where shoppers can place catalog orders for items that are not available. J.C. Penney's Internet business, said Boylson, will reach $1 billion by year's end.
Flash back to the year 9000 and J.C. Penney s search for a new marketing message. "At that time, sales were soft and the organization had lost its focus in terms of what the brand stood for," said DDB's Polston. The answer came in the, form of the "Its all inside" tagline, with TV ads airing for the first time that year during the Academy Awards.
The tag works on two levels, said Polston. One is to reinforce the idea of J.C. Penney as a resource with a wide array of offerings. "It also draws a connection between what's 'inside' the female shopper as an individual and her desire to create self-expression in her life," he said.
During the 2005 Oscar ceremony, energetic spots--set to tunes such as "One Way or Another" and "What I Like About You"--featured women going about their busy days. One ad touted a sweepstakes with a grand prize of $100,000 and a trip to the Oscars' red carpet in 2006. Ads in fashion magazines, online, direct mail and newspaper inserts supported, all under the revised tagline, "For all the sides of you."
Back-to-school efforts, meanwhile, targeted kids with the theme of "All access." The idea was to promote the concept of having a "backstage pass" to J.C. Penney clothes, dorm decor, smart prices and events. Dance competitions with an American Idol-style format were held in conjunction with Seventeen and Cosmo Girl in front of J.C. Penney stores in New York, Chicago, Los Angeles, Dallas and Miami. The campaign featured the return of J.C. Penney's bobblehead dude from 2004 in TV ads, store signage, print ads and on its Web site, jcpallaccess.com.
"J.C. Penney has done a great job refocusing on who its consumer is," said Alien Montgomery, vp/gm at Wrangler Specialty Apparel, a division of VF Corp. "Within the past 18 months, they've [cleaned] up the stores and [made] them bright, fun places to shop."
Howard Davidowitz, chairman of a namesake retail consultancy and investment banking firm in New York, agreed. "They have reinvented the company, identified top talent and started to gain share back."
With the Federated-May merger, he added, J.C. Penney may pick up store locations (and customers) that Federated will divest. In the coming year, May will begin phasing out stores and folding some of its Marshall Field's stores, Filene's, Hecht's and other locations into the Macy's or Bloomingdale's banners.
J.C. Penney's main competition is the regional department store Kohl's, located mainly in the Midwest. Kohl's racked up a 13.8% sales increase last year and is looking to expand with a similar marketing strategy of airing ads during the Emmy Awards. "Kohl's is half the size dollar-wise and in the number of stores," noted retail/fashion consultant Lewis. "In those markets where a Penney's is located, Kohl's is the new exciting kid on the block."
J.C. Penney, however, is carving out more convenient locations in strip malls and lifestyle centers. In Bolger Square, Independence, Mo., consumers can drive right up to a storefront, which is located in a residential area and offers longer hours and central checkouts.
Customers may still bring their Sunday circulars, but might want to leave those sweats home and find something a bit nicer in which to roam the aisles.
RELATED ARTICLE: In Penney's private label, far from alone.
Surf's up at J.C. Penney in November with the rollout of its new private clothing label, Solitude. Inspired by coastal California living and created in 1998 by surf icon Shaun Tomson with his wife, designer Carla Tomson, Solitude includes shirts, shorts and swimwear at affordable price points in line with J.C. Penney's existing collections.
Oxford Apparel Group, a sportswear division of Oxford Industries, acquired Solitude in August 2005. Oxford also produces and markets Tommy Bahama, Ben Sherman and Oxford Golf, and holds the exclusive licenses to produce and sell product under the Tommy Hilfiger, Nautica, Geoffrey Beene, Slates, Dockers and Oscar de la Renta labels. J.C. Penney will be the exclusive retailer for Solitude, which previously was sold through department stores such as Saks Fifth Avenue, Barneys, Bloomingdale's, Nordstrom and high-end sporting goods stores including Galyans and REI. Bruce Willis and Julia Louis-Dreyfus, notably, are fans of the brand.
Tomson and Oxford unveiled the new arrangement at the Magic apparel trade show in Las Vegas this past August. "I felt there was a gap in the marketplace for 25-45 year-olds who felt young and connected to nature," said Tomson. "Our concept is easy care and simple, but also quality."
Solitude will be produced by its existing supplier base, he noted, with the same fabrics and producers. "I think J.C. Penney is at the cutting edge of retailing right now."
Tomson will help promote Solitude during personal appearances, and both he and his wife have appeared in ads for the brand. Tomson is regarded as one of the most influential surfers of modern time. A native of South Africa, he captured the World Championship on the International Professional Surfing Tour in 1977 and spent 14 years on the World Tour, including a record-setting six-year winning streak.--S.O.
Photograph by Linda Lux