JCPenney said this week that it plans to spend more than $1 billion by the end of 2025 to revive the storied but troubled 121-year-old department store chain, The Associated Press reported.

This investment is poised to become the next chapter in JCPenney’s proverbial cat with nine lives survival tale, but experts who spoke with GlobeSt.com say that the $1 billion isn’t enough to make it thrive, and it first must solve its inventory problems.

Much maligned for years, the money will be used to remodel its stores, upgrade its online shopping site and app, and make its supply network more efficient so that online orders are delivered more quickly.

 

JCPenney’s CEO Marc Rosen, who took over the company in November 2021 and has served as an executive at Levi Strauss and Walmart, is renewing the chain’s focus on its core middle-income shoppers with affordable fashion and housewares.

Rosen told The Associated Press that’s a change from previous management teams’ failed strategy to pursue wealthier shoppers with offers of trendy items and major appliances.

JCPenney’s, however, which emerged from Chapter 11 reorganization in December 2020 with new owners, is playing catch-up to the competition.

Its new owners — mall companies Simon Property Group and Brookfield Property Partners — shuttered nearly a quarter of its 850 stores, leaving approximately 650 stores.

Placer.ai, which tracks people’s movements via cellphone usage, shows that visits for JCPenney stores are down 24% compared with the year-ago period.

Some analysts believe that the $1 billion investment will have a revitalizing effect.

“Across the country, big-box retail has been struggling and JCPenney’s recent announcement is a breath of fresh air,” Michael J. Romer, Co-Managing Partner, Romer Debbas LLC, tells GlobeSt.com. “With the current state of the economy and the cost of everything increasing due to inflation and interest rates, your average consumer needs reasonably priced vendors to exist and to exist physically.”

Shopping malls across the US – especially those outside of luxury markets – are in desperate need of anchor tenants such as JCPenney to survive, Romer said.

“However, large-scale sophisticated retailers understand that, in today’s market, you have to be able to accommodate both the in-person consumer and the online consumer,” Romer said. “JCPenney’s efforts should be applauded and will hopefully encourage others to follow suit.”

JCPenney’s planned upgrades are indicative of a trend that all retailers are experiencing.

“With consumer spending continuing to decline in the face of inflationary pressures, we will see a gradual winnowing of the field of both brick-and-mortar and online retailers,” says Daniel Gielchinsky, Partner and Co-founder of DGIM Law. “Retailers that demonstrate agility and improve the shopping experience will likely survive this recessionary period, while the retailers who rest on the laurels are bound to lose market share.”

Rick Scardino, Principal of Lee & Associates of Illinois and Director of its retail brokerage group, tells GlobeSt.com that there is public sentiment in support of JCPenney’s survival.

“It has become the proverbial cat with nine lives, but that’s not enough to make it thrive,” he said.

“Its focus should be on solving a major, long-standing problem which is lack of inventory. Too often, the stores lack adequate stock due to pulling store inventory for online sales or just due to cost-cutting measures.

“Quite simply, you can’t sell what’s not on the shelves. With many of the freestanding stores closed and the remaining stores being at a mall entrance, there still is a good chance for the consumer to enter or depart the mall through a Penney’s, but the shelves need to be loaded with products that middle America wants.”

Still, Matthew Lux, Partner, Beta Retail, tells GlobeSt.com that JCPenney’s has every opportunity “to be a survivor” in the retail space.

“They already have great real estate, infrastructure to create and distribute and sell the merchandise, so this investment will likely produce immediate returns,” Lux said.

“Despite what you may have read or heard, regional malls and department stores are not dead. Some do cease to exist. Whether it happened from bad management, bad timing, changing trends, a pandemic, or simply bad real estate, there has been a lot of change. And change is good – change allows new ideas, and new initiatives to flourish. And from my view, the survivors of the shake-up are thriving.

“Best-in-class malls are attracting more tenants than ever, and these centers are being leased to an incredibly strong assortment of new retailers, entertainment operators, and other innovative uses.”

Dan Villalpando, partner, Cox, Castle & Nicholson, tells GlobeSt.com that he is pleased that JCPenney elected to re-invest money into its business, rather than simply shutter its stores and go the way of Robinson-May and other now defunct department stores.

“The closure of those large-scale department store tenants has created a glut of unused space in the mall sector, which has negatively affected mall owners,” Villalpando said. “So, by keeping its stores open, JCPenney has already helped to sustain foot traffic in the malls it has been a part of for many years.”

In addition, as part of its spending plan, JCPenney will be reinvesting in its private label brands.

“This comes at a time when many mall customers have been more careful about their spending and may look to private label brands to save money, thereby increasing traffic to JCPenney stores and malls in general,” Villalpando said.

John Sechser, Managing Director of TRI Commercial/CORFAC International, tells GlobeSt.com that JCPenney’s is the last of the dominant value/discount retailers offering a wide range of products from soft goods to hard goods.

“This is a critical time in their history to reinvent their entire product and merchandising program, utilizing multimedia and multichannel marketing,” Sechser said.

“It will be interesting to see if they reconfigure their bricks-and-mortar footprint along with more bricks-to-clicks, consumer-friendly buying along with returns of merchandise. Retailers with products perceived as good value for the dollar spent will continue to excel in the recessionary times ahead.”

Gielchinsky notes that stores whose product mix overlaps with JCPenney’s, like clothing and shoe stores, jewelry outlets, and smaller off-brand stores, will likely suffer decreased sales as more customers are attracted to shopping at JCPenney’s for its competitive pricing, the availability of a variety of products within one store, and a better customer experience.

Derek Heeb, AIA, Senior Studio Director and Associate Principal at RDC, tells GlobeSt.com the reinvestment is a sign there is still a lot of potential in retail.

“It also demonstrates how the built environment is a critical part of the retail experience,” according to Heeb. “We expect this move to have a ripple effect of improvements by mall owners and synergistic retailers.”

 

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