Image: J.C. Penney.
Investors have waited for years for discount retailer J.C. Penney to execute on a successful turnaround strategy, and the jury is still out on whether the company is on the right track. Even though the retailer has reduced its losses and found ways to improve sales recently, it nevertheless hasn't fully bounced back from the exodus among its once-loyal customer base.
Continue Reading Below
Yet executives at the company still think Penney has plenty of room to recover in the months and years to come. Let's take a closer look at just how J.C. Penney's management team believes the company can recover fully from its difficulties in recent years.
CEO Marvin Ellison knows from his retail experience elsewhere that embracing online shoppers is a key to boost Penney's overall business. Yet he has also identified the company's relative lack of popular options, like same-day in-store pickup, as a huge competitive liability in a cutthroat industry environment.
He also believes that it's essential to take advantage of Penney's brick-and-mortar network to act as a distribution center for shoppers looking for faster fulfillment of online orders. That way, Ellison hopes that customers will come into stores, and end up doing additional shopping on the trip, producing a win-win for the retailer. By bringing in omnichannel specialists, Penney hopes to expand its sales channels and get more revenue flowing into the company.
Store-within-store concepts have worked well for a number of different retailers, and Penney, in particular, has enjoyed success from bringing in loyal Sephora customers who are looking for ways to get products without necessary going all the way to a Sephora retail location. Ellison has continued to bolster the partnership by working with Sephora executives, and he believes that, by taking advantage of a reliable flow of customers that like having in-store options like Sephora offers, J.C. Penney can accelerate its recovery, and appeal to a whole new class of shoppers.
J.C. Penney has seen slow-but-steady, progress in comparable-store sales, but the nature of the discount retail business is that it's difficult to drive growth based on price. Promoting higher-value partnerships like Sephora can help, but in the end, Penney acknowledges that it will have to rely primarily on boosting volume in order to keep sales moving higher. With a combination of bringing in more customers through its doors and then encouraging them to buy more items once they arrive, Penney believes that it can continue its upward momentum on the comps front throughout the rest of the year and beyond.
One thing investors need to remember is that, while Penney has tried to recover, the rest of the retail world hasn't sat still. New advances have made it even more difficult for Penney to catch up. In particular, finding ways to combine its extensive brick-and-mortar network assets and the potential from online sales will remain challenging. Over time, though, Ellison thinks he can challenge his team successfully to find new ways to push Penney forward, and make it return to profitability.
For a long time, Penney had hoped to eliminate its promotional nature in favor of permanent low pricing. Now that it's failed, Ellison is committed to sticking with Penney's traditional approach.
How that ends up taking shape remains to be seen, as it's evident that the old way of doing business had its problems for Penney, as well. Nevertheless, Ellison hopes to take the best lessons from all of its recent efforts and try to bring them together to create a lasting solution for Penney in the future.
Penney has thus far avoided disaster, but it still has a long way to go before it can reach a full recovery. Investors should watch closely to see if Ellison and his team can convert on the promises they've made to shareholders.
The article 5 Things J.C. Penney Management Wants You to Know originally appeared on Fool.com.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.