JC Penney gets facelift with new brand

New York: The US economy may be stumbling, but JC Penney Chairman and CEO Myron 'Mike' Ullman III believes its biggest brand launch ever - an exclusive line with Polo Ralph Lauren - could not happen at a better time.

"We think given this competitive climate, we are very well positioned to take market share," Ullman said in a recent interview.

The brand, 'American Living', is expected to be a billion dollar business in the next few years, accounting for 5 per cent of the department store chain's annual sales, Ullman said. It spans 40 categories, from women's and men's clothing to home furnishings, shoes and luggage.

The merchandise, which started arriving in stores over the past few weeks, reflects the Ralph Lauren aesthetic - pink cotton polo shirts, floral bedspreads and Madras shorts, for example.

"American Living will lift the overall look and feel of the store," Ullman said. Women's blazers under the American Living brand retail for about $160 while dresses are priced at about $100. That's about 15 per cent higher than the department store's top tier clothing brands like Liz & Co. and Jones Wear.

"It helps diversity our business by reaching customers and new channels of distribution," said Roger Farah, president and chief operating officer of Polo Ralph Lauren, in an address to investors Wednesday.

As part of the alliance, Global Brand Concepts, a new division of Polo Ralph Lauren, owns the trademark for the brand and oversees the design, sourcing and production, while Penney's owns the actual product and is responsible for inventory and the selling of the merchandise.

Since taking over the helm in 2004, Ullman has spearheaded a store expansion plan while developing more upscale, exclusive labels with designers like Nicole Miller and home furnishing expert Chris Madden.

Last year, the Plano, Texas-based company launched a store label lingerie brand called Ambrielle, which has been successful. Penney's has also scored with its Sephora cosmetics shops within its stores. Such initiatives have helped the department store steal market share away from rivals like Macy's Inc.

In particular, JC Penney is aiming to lure younger, trendier customers to its stores. While Ullman noted that half of American households are Penney's customers, its most underserved market is the 18- to 35-year-old age group.

"Penney's has done an excellent job with their brands; they have been better than most stores," said C. Britt Beemer, chairman of America's Research Group.

Still, Penney's, which caters to middle-income shoppers, saw its overall business slip starting last fall amid a deteriorating economy; it reported a drop in third-quarter profits in November. On Thursday, the company, along with other major retailers, reported weak sales in January at stores that have been open at least a year.

Still, the chain's 1.9 per cent same-store sales decline in its department store business was better than the 6.3 per cent drop that Wall Street estimated. Penney's is expected to report its fourth-quarter financial results February 21.

Ullman said that the weakest categories have been window treatments, furniture, jewellery and dress-up clothing. At the same time, he noted that Sephora, which is not heavily discounted and is considered "an aspirational" purchase, was one of the most successful areas this past holiday season.

Ullman noted a "precipitous change in consumer sentiment" last fall. And he believes that certain parts of the country like Florida and Nevada, both of which have been among the hardest hit by a housing slump, are in a recession. To prepare for the slowdown, Penney's is becoming more cautious about its inventory and scaling back store expansion. The company will open about 10 fewer stores out of the 50 planned for each of 2008 and 2009.