Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, Jun 19 1992 Date: Fri, 19 Jun 92 05:24:16 EDT Message-ID: 06-19 0000 BONUS: Penney's new image fits '90s USA TODAY Update June 19-21, 1992 Source: USA TODAY:Gannett National Information Network From a retailer's point of view, there's not much to like about the '90s consumer. Economic woes, demographic shifts and changing financial priorities have put a drag on spending. Maybe a permanent drag. It's enough to make a department-store retailer cry. ARE ALL RETAILERS HURTING? Jim Oesterreicher, president of J.C. Penney stores. Oesterreicher can thank the disgruntled, skeptical, penny-pinching consumer for, among other things, one heck of a first-quarter performance. "The economy brought a whole bunch of consumers right to our door," says Oesterreicher. Shoppers now see themselves as more value-conscious, less prestige-oriented, he says. "Times have brought them back towards their image of Penney." WHAT IS BRINGING BACK CONSUMERS? Shoppers who flooded the halls of tony department stores have left the '80s behind. Downscaling is a popular description for consumers' focusing on basics and looking for stores that offer value, not prestige. For many of those shoppers, downscaling means taking another look at Penney, a store that has been trying to get their attention for nearly 10 years. HOW WELL ARE THINGS GOING? In its first quarter, which ended April 30, Penney's net income jumped 70%. On Wall Street, the company's shares rate a buy after lingering in the hold and sell category most of last year. Shares closed at $67 5:8 Thursday after trading as low as $42 1:2 last year. Last month, revenue at stores open at least one year was 9% higher than May 1991, outstripping competitors such as Kmart and Sears by a wide margin. In March and April - Easter season - Penney achieved increases both months while most retailers turned in uneven results. WHAT IS THE OUTLOOK? Stock analysts expect Penney to earn $5.20 a share this year, $6 next year, says Zacks Investment Research. That's up from $4 last year. If those gains come through and Penney's stock keeps selling at 17 times the previous year's earnings per share, the stock would jump to $88 in a year and $102 in two years. IS THIS MORE THAN A PASSING TREND? That isn't just a run of good luck, says retail analyst Tom Tashjian of brokerage First Manhattan. This is the turnaround that finally could. "They've not only regained lost ground, they have gotten on track to move ahead," he says. "They've lowered their prices. They are communicating with the customer. The word is getting out, to shoppers and to investors." WHAT CAUSED THE PROBLEMS? It's been a long and bumpy road since 1983, when Penney shucked its hard lines, such as appliances, paint and hardware, to dedicate itself to soft goods, such as clothing, linens and cosmetics. Analysts say the retailer suffered from too great a reliance on private-label merchandise when shoppers wanted well-known brands. Prices were too high for many of the basic lines, they add. WHAT HAS CHANGED? The key changes came last year. Penney got itself a new ad campaign, lowered prices and rejiggered its merchandise. Those are the changes that clicked, analysts say. "Some of it's luck. Some of it's skill. But it's working," says Oesterreicher. WHAT HAVE THE NEW ADS DONE? The key phrase, repeated throughout a new set of television ads is "We've changed: J.C. Penney." The new spots are the product of ad agency Temerlin McClain (formerly Bozell), which Penney hired last June. The look and the message represent a stab at shifting Penney's image. "People are used to thinking of Penney as dowdy, not style-oriented. But the new ads are on the level of a department store," says retail consultant Barbara Wold. WHAT DO THE NEW ADS LOOK LIKE? If you haven't seen the TV commercials, chances are you will soon. In fast-moving MTV style, the spots highlight vibrant, stylish shoppers in Penney's stores. The camera focuses on famous brand names, fashions and sale signs. Top brass recognizes that the commercials have struck a chord and plans to increase their air time in coming months. Ad spending is up an estimated 10% from last year. Penney also has beefed up its newspaper-circular program from 24 to 26 weeks. HOW LOW HAS J.C. PENNEY CUT PRICES? Late last year, Penney cut prices across the board - an estimated 8%, say retail analysts. Knit tops for infants dropped from $5 to $3.99. A man's polo shirt was $24, now it's $19.99. That was the clinching move that lured in reluctant customers, analysts say. "By lowering prices on the most visible basics, J.C. Penney presents itself as the best value for the customer. That's a key message among today's consumers," says Wayne Hood, analyst at Prudential Securities. HAVE NAME BRANDS HELPED? Value is not synonymous with low price, says Tygart. Over the past three years, Penney has been steadily adding name brands - at good prices - to its merchandise to better compete for department-store customers. Names such as Levi's Dockers, Jockey and Van Heusen are recent additions to Penney's racks. In some departments, Penney has decided that only brand names will do. WILL CUSTOMERS BE HAPPY? As Penney aims for downscaling department-store customers, it may be offering more than it can deliver. The products are better - but are they as good as the commercials imply? "It's great that they've created all this excitement to pull customers back in," says Wold. "Shoppers have to decide if the product is what they expected. That's impossible to predict. But it's the key element that will decide whether or not Penney's success is long- or short-term." WILL J.C. PENNEY'S SUCCESS CONTINUE AS THE ECONOMY PICKS UP? Oesterreicher says it will. "There will be changes, of course," he says. "But I don't think we will ever see a return to the late '80s." Bonus Editor: Ed Kelleher. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM