Commentary

Penney Gets A Breath Of Joe Fresh Air

JC Penney tried another Fresh start Friday  -– literally -– with the formal opening of 681 Joe Fresh stores-within-the-store across the U.S. Owned by the Canadian giant Loblaw Cos., Joe Fresh offers trendy, low-priced clothes that are popular in Canada but were previously little known in the U.S. 

“If Joe Fresh doesn’t work, this could be the worst Ides of March since Brutus greeted Caesar on the floor of the Senate,” Maxim analyst Rick Snyder told Bloomberg’s BusinessWeek’s Sapna Maheshwari recently. Joe Fresh “is kind of a microcosm of what they’re trying to do, and if it doesn’t work, I think it’s going to get really ugly.”  

The Canadian brand “launched online during the Oscars and in the days after became the store’s most popular apparel brand and 61% of those shoppers were first-time jcp.com customers, CEO Ron Johnson said during a call with analysts Feb. 27,” NBC News’ Amy Langfield reports in a story covering the opening of the Joe Fresh boutique at Penney's Manhattan Mall location on 33rd Street in New York City.

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Joe Fresh boutiques at J.C. Penney stores will specialize in women’s clothing, at least at first, Christopher Freeburn writes for InvestorPlace.com, with between 1,000 and 2,500 square feet of retail space. 

The remake of JC Penney has been getting nothing but poor results and worse press since former Apple retail whiz kid Ron Johnson started rolling out his “no sales” plan to consumers. That strategy proved to be a disaster, and the company is bringing back some sales, as the AP’s Anne D'innocenzio reported in January. 

The other prong of the makeover –- the concept of branded stores within the store –- has not only had its days in court recently with the Martha Stewart/Macy’s brouhaha but also on the retail floor. It currently has about a dozen shops –- the first, Sephora cosmetics, was launched in 2006 –- and they are “doing well,” according to an Oppenheimer & Co. Inc. analyst, Brian Nagel, cited by NBC’s Langfield. 

“In the third quarter they were tracking 30% ahead of pre-reset levels,” Langfield reports, but “lingering concerns include disruptions as the new home-goods areas are installed; an overall decline in foot traffic; and [Johnson’s] forecasted cash burn of $900 million in the first quarter and $400 million in the second.”

“Joe Fresh has been providing affordable fashion at over 300 stores in Canada since 2006…,” writes the Examiner.com’s Alaina Brandenburger in covering the opening of a shop at the Orchard Town Center in Westminster, Colo. “Shoppers are drawn to the brand because they can find items such as dresses and jeans for under $100 without sacrificing style.” 

Late last month, when Penney announced that it had lost a whopping $552 million during the fourth quarter, CEO Johnson said:  “Looking ahead, we are energized by our shop roll-out plans for 2013 and the exciting work our teams are undertaking to transform the store. Combining a new marketing campaign focused on style and value, incredible new brands and updated merchandise, with continued enhancements to the customer experience both in our stores and on jcp.com, we are working towards reconnecting with our core customer while attracting new customers to JC Penney.”

As for reconnecting with financial analysts and the business press, he’s got a tough aisle to hoe. In a piece reacting to the return of coupons and sales to Penney in late January, Forbes’ Abram Brown cites a discussion about the retailer he’d had several weeks before with Margaret Bogenrief, a principal at ACM Partners, a distressed investing boutique.

“Johnson’s trying to manufacture a massive turnaround when everybody is trying to leave,” Bogenrief said, offering that the “best-case scenario” is that “they’ll be like, the poor-kids-version of Target.”

But in another piece in Forbes about Johnson last year, an optimistic Carmine Gallo recounted some of the skepticism surrounding Apple’s foray into retail in 2001. He then quoted Johnson’s closing remarks at an analysts’ conference: 

“It’s really hard to transform things,” Johnson said. “It isn’t always fun. But that’s what we’re going to do. I’ve seen this movie and I’m really excited to see how this one plays out.”

Aren’t we all?

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