Turnaround of JC Penny

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Case Details:

Case Code : BSTR160
Case Length : 15 Pages
Period : 1990 - 2005
Organization : J C PENNEY
Pub Date : 2005
Teaching Note : Available
Countries : USA
Industry : Retailing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"In the march of years, however, the emphasis widened to include a variety of other businesses as the stores swelled with an ever-increasing range of merchandise including an emphasis on value fashions. With those changes, the difference between JCPenney and its competitors narrowed"1.

- Bill Hare, 'Celebration of Fools: An Inside look at the rise and fall of J C Penney,' Amacom, 2004.

We are very pleased with the improvements we continue to achieve in our business. Our (2004-05) results reflect the impact of effective merchandising programs, including transition of seasonal product, compelling marketing and continued improvement in the shopping experience in our stores.2

- Myron Ullman, Chairman and Chief Executive Officer, J C Penney Company, Inc. in 2005.


J C Penney Company, Inc. (JCP), a leading retailer in the US with a century of experience behind it, found itself unable to keep pace with the changes taking place in the retail environment in the late 1990s and this showed on its performance. Return on shareholder equity came down to - 8 percent in 2000 from 20 percent in 1994 while earnings before interest, taxes, depreciation, and amortization came down from 9 percent of sales in 1996 to about 3 percent in 2000. In 2000, JCP stock plunged below $10, resulting in the company losing its investment-grade rating.

The company thus had to go through a restructuring program starting 1999-2000.

As part of this program, JCP centralized its buying process, sold off the Eckerd drugstore chain that it owned, aligned its HR practices with its business goals, and tried to position itself as a trendy yet value offering retailer.

And these restructuring initiatives proved to have been the right move. They started showing results in the early 2000s. JCP's income from continuing operations increased to $328 million in 2004-05 from $253 million in 2003-04. The value of JCP stocks improved from $10 in 2000 to almost $50 in 2005.

Background Note

The history of JCP can be traced back to 1902 when James Cash Penney opened The Golden Rule, a dry goods and clothing store, in Kemmerer, Wyoming, in partnership with his employers, merchants Thomas M. Callahan and William Guy Johnson.

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1] Bill Hare, "Celebration of Fools,"Amacom, 2004.

2] "JCPenney Fourth Quarter Earnings Per Share Increase 40 Percent,"www.jcpenney.com, February 24, 2005.


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