JC Penney chalks out growth strategy, updates Q3 outlook

REPORT_ At its 2014 analyst meeting in New York, JC Penney Company discussed and

firmed up its plans for restoring sustainable profitable growth at the company over the next three years. The company also provided financial performance goals that include achieving 1.2 billion dollars in EBITDA in 2017. Revising its third quarter sales guidance, company said that it expects softer selling than expected during the month of September due to lower levels of clearance compared to last year and the continued difficult retail environment.

The financial aim reflects expectations for top line improvements associated with incremental growth potential, as well as continued market share gains in its underlying business, which represents a 3.5 billion dollars sales opportunity. Of that amount, the company conservatively expects to realize approximately 2 billion dollars in incremental sales over the next three years, resulting in mid-single digit sales growth during that period.

In the third quarter, the Company now expects comparable store sales for the third quarter of 2014 to be in the low-single digit range, compared to its original guidance of mid-single digit growth. The company reaffirms all other guidance for the third quarter and full fiscal year 2014, which includes delivering mid-single digit comparable store sales growth and positive free cash flow for the year.

“JC Penney is in a far stronger position today than it was when we began our turnaround effort 18 months ago. While we recognize that there's more work to be done in a highly competitive retail environment, I couldn't be more encouraged by the significant progress our teams have made in such a short amount of time," said Myron E. (Mike) Ullman, III, Chief Executive Officer.

During the analyst meeting, the company's senior leaders identified three areas of the business that are expected to generate incremental sales growth between 2015 and 2017. These initiatives include revitalizing the highest traffic area in the store - center core - as a leading destination for beauty, jewelry and fashion accessories; improving the productivity of the Home Store with value-driven products and a tailored promotional strategy; and maximizing the power, reach and integration of the company's omnichannel capabilities.

The company announced the expansion of its highly successful partnership with Sephora, as the companies have agreed to open additional Sephora inside JC Penney locations through 2017, entering new and smaller markets as the first major beauty destination in town. JC Penney is leveraging its position as the only US department store retailer carrying an exclusive assortment of Disney merchandise by opening more than 100 additional Disney-branded shops inside JC Penney by back-to-school 2015.

The Company has also entered into an agreement with Hallmark to test a Hallmark shop concept carrying greeting cards, gifts, ornaments, holiday décor and more in 15 JC Penney stores this fall, including a newly opened Hallmark shop within the Home department at its Frisco, Texas location.