Analysis of Organization – Functional Strategies

Profitability of strategic audit of  jcpenney

Key Ratios -> Profitability
Margins % of Sales	2010-01	2011-01	2012-01	2013-01	2014-01	2015-01	2016-01	2017-01	2018-01	2019-01	TTM
Revenue	100	100	100	100	100	100	100	100	100	100	100
COGS	60.64	60.81	63.97	68.69	70.55	65.24	63.95	64.33	65.36	65.48	64.5
Gross Margin	39.36	39.19	36.03	31.31	29.45	34.76	36.05	35.67	34.64	34.52	35.5
SG&A	32.74	31.61	30.3	37.42	35.85	32.63	31.18	28.35	27.9	29.92	30.92
R&D
Other	2.82	2.88	3	4.21	4.85	5.09	5.21	4.81	4.59	4.63	4.75
Operating Margin	3.8	4.71	2.72	-10.32	-11.25	-2.95	-0.35	2.51	2.15	-0.02	-0.17
Net Int Inc & Other	-1.51	-1.44	-4.05	-1.51	-4.65	-3.15	-3.64	-2.49	-4.09	-2.23	-2.33
EBT Margin	2.3	3.27	-1.33	-11.83	-15.9	-6.1	-3.99	0.02	-1.94	-2.25	-2.5
Profitability	2010-01	2011-01	2012-01	2013-01	2014-01	2015-01	2016-01	2017-01	2018-01	2019-01	TTM
Tax Rate %	38.21	34.94						50
Net Margin %	1.43	2.19	-0.88	-7.59	-11.7	-6.29	-4.06	0.01	-0.93	-2.12	-2.38
Asset Turnover (Average)	1.43	1.39	1.41	1.22	1.09	1.1	1.27	1.34	1.41	1.49	1.43
Return on Assets %	2.04	3.04	-1.24	-9.29	-12.86	-6.94	-5.17	0.01	-1.31	-3.16	-3.41
Financial Leverage (Average)	2.63	2.39	2.85	3.08	3.82	5.44	7.21	6.88	6.1	6.6	8.58
Return on Equity %	5.62	7.6	-3.21	-27.43	-44.36	-30.83	-31.83	0.08	-8.49	-20.01	-25.52
Return on Invested Capital %	3.09	4.76	-1.91	-12.67	-15.21	-4.4	-1.5	3.56	2.05	0.73	0.18
Interest Coverage				-5.8	-4.35	-0.84	-0.24	1.01	0.26	0.13	0.04

Source: (Morning Star, 2019).

The profitability ratios of the corporation indicate how much profit the organization is generating in a specific time period. The above table is showing the profitability ratios of JC Penny Corporation. The ROA of the organization shows how efficiently the organization is using its assets for generating income. The ROA of JC Penny is showing a downward trend along with Net margin. It means that the company is generating very low profits. The organization should take steps to improve its profitability. If the organization is not going to improve its profitability than serious issues can occur and organizations might not be able to sustain for the longer time period (Fridson & Alvarez, 2011).

 

Liquidity of strategic audit of  jcpenney

Liquidity/Financial Health	2010-01	2011-01	2012-01	2013-01	2014-01	2015-01	2016-01	2017-01	2018-01	2019-01	Latest Qtr
Current Ratio	2.05	2.41	1.84	1.43	1.7	1.93	1.67	1.69	1.46	1.52	1.37
Quick Ratio	1.05	1.12	0.7	0.38	0.53	0.59	0.37	0.37	0.2	0.17	0.08
Financial Leverage	2.63	2.39	2.85	3.08	3.82	5.44	7.21	6.88	6.1	6.6	8.58
Debt/Equity	0.63	0.57	0.71	0.93	1.59	2.8	3.57	3.37	2.89	3.35	4.86

Source: (Morning Star, 2019).

The liquidity ratios show how much cash an organization has to pay back its short term obligations. JC Penny has enough cash from which the organization can pay back its short term loan. However, the organization’s liquidity is declining at a higher rate. The liquidity ratios are showing a declining trend, which should be a matter of concern for the organization (Jonathan, 2010).

Financial Leverage of strategic audit of  jcpenney

Key Ratios -> Financial Health
Balance Sheet Items (in %)	2010-01	2011-01	2012-01	2013-01	2014-01	2015-01	2016-01	2017-01	2018-01	2019-01	Latest Qtr
Cash & Short-Term Investments	23.93	20.1	13.19	9.51	12.84	12.67	9.53	9.52	5.44	4.31	2.12
Accounts Receivable	3.14	2.56	3.62	0.58	0.03
Inventory	24.04	24.64	25.53	23.93	24.87	25.49	28.82	30.64	32.83	31.56	29.92
Other Current Assets	1.76	1.54	2.14	3.63	3.21	3.47	4.2	3.82	2.26	2.45	3.33
Total Current Assets	52.87	48.84	44.48	37.65	40.95	41.63	42.55	43.99	40.53	38.32	35.36
Net PP&E	42.58	40.11	45.31	54.73	47.61	49.48	51.01	49.38	50.89	51	54.67
Intangibles	1.41	1.79	4.95	6	4.53	4.79	5.3	5.8	6.83	7.89
Other Long-Term Assets	3.13	9.26	5.27	1.62	6.9	4.1	1.14	0.84	1.75	2.78	9.96
Total Assets	100	100	100	100	100	100	100	100	100	100	100
Accounts Payable	11.14	8.69	8.95	11.88	8.03	9.58	9.8	10.49	11.57	10.97	10.63
Short-Term Debt	3.12		2.02		5.7	0.27	1.07	2.82	2.76	1.19	2.38
Taxes Payable	1.19	1.33	1.21	0.8	0.75	0.72	1.17	1.36	1.21	1.1
Accrued Liabilities	4.92	9.22	10.67	9.96	6.66	7.91	9.82	8.04	8.81	9
Other Short-Term Liabilities	5.45	1.05	1.28	3.77	2.97	3.06	3.7	3.25	3.38	2.89	12.76
Total Current Liabilities	25.82	20.3	24.12	26.41	24.12	21.54	25.55	25.97	27.72	25.15	25.77
Long-Term Debt	23.84	23.76	25.13	29.32	41	51.15	49.44	46.59	44.93	48.13	43.45
Other Long-Term Liabilities	12.36	14.08	15.64	11.85	8.72	8.91	11.15	12.91	10.96	11.57	19.12
Total Liabilities	62.02	58.14	64.9	67.58	73.84	81.6	86.14	85.46	83.61	84.85	88.34
Total Stockholders' Equity	37.98	41.86	35.1	32.42	26.16	18.4	13.86	14.54	16.39	15.15	11.66
Total Liabilities & Equity	100	100	100	100	100	100	100	100	100	100	100

Source: (Morning Star, 2019).

The financial leverage ratios of the organization show the capital structure of the organization. The financial leverage ratios show how much debt the corporation has taken. The debt of the JC penny corporation is increasing at an alarming rate. With too much debt the corporation can face insolvency because the company might unable to pay a huge amount of debt. The organization should not take further debt because it will increase its cost of capital (Fridson & Alvarez, 2011).

Asset Management

Key Ratios -> Efficiency Ratios
Efficiency	2010-01	2011-01	2012-01	2013-01	2014-01	2015-01	2016-01	2017-01	2018-01	2019-01	TTM
Days Sales Outstanding	3.66
Days Inventory	107.71	105.4	101.3	107.57	115.08	127.52	121.45	126.06	125.39	120.56	128.13
Payables Period	44.48	42.82	35.62	44.69	46.02	44.39	43.44	43.01	43.54	42.2	43.27
Cash Conversion Cycle	66.88
Receivables Turnover	99.75
Inventory Turnover	3.39	3.46	3.6	3.39	3.17	2.86	3.01	2.9	2.91	3.03	2.85
Fixed Assets Turnover	3.27	3.35	3.32	2.47	2.16	2.28	2.53	2.67	2.82	2.92	2.73
Asset Turnover	1.43	1.39	1.41	1.22	1.09	1.1	1.27	1.34	1.41	1.49	1.43

 Source: (Morning Star, 2019).

The Asset management ratios show how efficiently the organization is utilizing its assets for generating sales. The efficiency ratios of JC penny is showing that the organization was managing its efficiently for generating sales. However, there is a lot of room for improvement. By further enhancing the efficiency the organization can increase its sales and profitability (Fridson & Alvarez, 2011).

Analysis of the organization's improvement initiatives & standards

The current strategic report of J. C. Penney Company, Inc. for 2019 outlined the performance goal of the company is to deliver $1.4 to $1.5 earning per share. The strategic plan is designed for a three-year plan and it will accelerate the growth of the company. The financial expectations are also improved as compared to 2017. The strategic initiatives of the company are related to improvements and standards that can be considered to balance the progress of the company. The managing department of J. C. Penney Company, Inc. is confident that the focus of the company is towards the expense management, new technology, and improvement in sales growth. The company will continue to accelerate the services and create shareholder values to increase the turnaround (Bizjournals. com, 2017). The area of focus is on different visions and strategies and all the important initiatives of the company are listed below,

Compelling customer proposition of strategic audit of  jcpenney

The senior leadership of J. C. Penney Company, Inc. is considering new methodologies to enhance the outlook and to improve the progress of the company. The focus of leadership is towards the compelling proposition that differentiates the company from the marketplace. The focus of management is towards reestablishing and rebuilding the company. The company is improving in terms of powerful private brands, exclusive attractions that increase the customer's values, and sought-after national brands (Ir. JCPenney. com, 2014).

 The J. C. Penney Company, Inc. has established powerful digital leadership by improving the functionality of mobile commerce. The services provided to the customers have enhanced that increase the merchandising process. The inventory management of J. C. Penney Company, Inc. is focusing on the inventory network for the customer-centric capabilities. The services are improved to deliver products on the same day that ultimately create a seamless customer experience. The leadership of the company is improving through associate engagement, customer loyalty, and integrity developed in the company (Businessinsider. com, 2019).

Incremental growth opportunities of strategic audit of  jcpenney

During the meeting of the analyst, the senior leaders of the company identified three major areas of business that can be determined for the analysis and development plans. The selected areas are expected to generate incremental sales and the initiatives taken by J. C. Penney Company, Inc. are listed below,

1)      Maximization of power, integration of the company and process to reach towards the capabilities of the company.

2)      Revitalization of the highest traffic areas in the store centers and the improved strategies for the leading destination of fashion accessories, jewelry, and beauty products.

3)      Improvement in the productivity levels that increase the value-driven products and then tailored promotional strategies.

Upgrading the store attraction of strategic audit of  jcpenney

J. C. Penney Company, Inc. is leveraging all the possible positions for the US departmental stores and the previous as well as new retailers are carrying the exclusive assortment to merchandise the products. The company has entered into a new agreement that shows hallmark to the concept of shops. J. C. Penney Company, Inc. has opened new stores within the home department at Texas location and fresco (Ir. JCPenney. com, 2016).

Financial goals designed for 2015 – 2017

The financial performance goal of the company is to achieve $ 1.2 billion for 2017. The analysis reflects top-line improvements that are mainly associated with the growth potential. The business improvement is approximately $ 2 billion in the case of incremental sales of three years. J. C. Penney Company, Inc. is committed to delivering compelling services to the customers, merchandising agents and it provides exclusive shopping experience. The target of the company will be achieved by eliminating the labels. J. C. Penney Company, Inc. differentiates the company services from brick and mortar for online competition. The company will maximize opportunities for specific merchandising strategies (Ir. JCPenney. com, 2014).

The J. C. Penney Company, Inc said that the stores are contributed less the 5% of the annual sales along with no profits of the company in 2016. To generate the annual saving the shuttering of the stores is expected around about $200 million by the J. C. Penney Company, Inc which is expected and ensures the $225 million in the pre-tax changes form the different closure in the first half of 2017. When the worker will be notified the list of the stores will be closed and released in the mid of the march. But although the J. C. Penney Company, Inc is slimming down its fleets in the last week of the CEO Marvin Ellison is outlined the initiatives of the company which is focusing on 2017 and it also improves the performance of the stores, and allow to builts the exceptional performance of profit in 2016.

 J. C. Penney Company, Inc. introduced strategies to maximize the opportunities under five specific merchandized strategies and these strategies are listed below,

Home refresh/Home department of strategic audit of  jcpenney

J. C. Penney Company, Inc in 2016 introduced the differed number of initiatives in the home refers or the home department involving the rolling out the appliance of showrooms which is also introducing the Ashley furniture and it's offering the online and piloting flooring Empire. In the online store, the appliance sales continue to drive the important and the complimentary growth which also improves the productivity in the home store. The Ellison added the new strategies in the homes which is similar to the HVAC pilot that is also rolled out during the year but it did not give the proper details.

Omnichannel of strategic audit of  jcpenney

As the CEO since taking over, the Ellison had highlighted the different omnichannel like one of the three key prongs which plans to bring in the JC Penney and that is also back to the profitability. For the full year of 2016 and the fourth quarter, the double-digit has the online sales of growth where the  J. C. Penney Company, Inc plans to extend that product which is online and also have the assortment through the more than the 140% in a first quarter. In January 2016 the Ellison continuing the J. C. Penney Company, Inc stores like the fulfillment center of the online ship form the order of the stores. When the functionality of the sites improved then it also enhances the ship form the capabilities of the stores along with to develop the improved mobile app.

Pricing strategy  of strategic audit of  jcpenney

The fourth initiative of the company is aimed at enhancing the J. C. Penney Company, Inc and it also has the gross margin, however, guiding the sales as well as couponing experiences. The J. C. Penney Company, Inc said that which is implemented the internal pricing of the process which also guides the promotional as well as pricing strategies of a decision by using the approach data-driven. Although the small variation changes the massive culture change of the J. C. Penney Company, Inc as well as also deliver to imposed the gross margin for the performances

Women apparel of strategic audit of  jcpenney

Although the J. C. Penney Company, Inc is pivoted to the different new sale of categories like the furniture along with the appliances which put less to the emphasis and the apparel categories and the company will work to improve the women apparel sales. There are different strategies that include adding products along with to improve the experiences of the shopping. In the quarter of 2017 the J. C. Penney Company, Inc plans to roll out the various products of Nike for all the stores along with the women apparel of the Adidas which is more than the location of the back to the school, season.

To improve the women apparel the J. C. Penney Company, Inc issuing the feedback of the customers which is also cut down on a time and it also takes to introduced in the demand of the store's styles. The process which speeding up it allows the J. C. Penney Company, Inc to keeps the tabs on the currents along with the trends which are cut down the clearance sales.

Beauty experience of strategic audit of  jcpenney

Among the different retailers J. C. Penney Company, Inc also focused on the beauty business which involves the Sphere store in the concepts of the stores along with the Salons by the styles. The positive delivered which is comparable for the store's sales in the fourth quarter along with the traffic driving of the J. C. Penney Company, Inc locations. To drive the beauty experiences in the different categories the J. C. Penney Company, In which is ended by the 577 Sephora location and its expects to launch the another

Conclusion of strategic audit of  jcpenney

In terms of mission, JCPenney has always believed in one firm statement which is; “To be the leading provider of style and value to middle America”. This undertaking is based on a significant matter which is solely the desire to take the company’s sales and profits at the sky-high limit. The spirit of this organization has always been to put the customer first and provide a service that one desires for itself. Hence, it describes the mission of the company which has only changed with time in a quite positive manner. In the previous mission statements given by the company did not pay heed upon capitalizing the important words like “We” “Customer” “Associates”, but these have been capitalized now. Thus, explaining the complete belief system of JCPenney into one line, which is only to provide the best.

J.C. Penney is one of the nation’s largest companies that is not dealing in just one kind of a product but it has a wide variety. It covers almost eight hundred and fifty stores across the United States of America, it also has dozen of stores in other countries as well. Along with Puerto Rico, it is one of the powerful e-commerce site, jcp.com, which is being used to deliver style as well as value for all the American families who are working hard day and night.

It is a great time of evolution for J.C. Penney. Their heritage as a departmental store is evolving quickly to meet all the demands of the 21st century. Evolution is being done for a dynamic retail environment in which almost all of the personal technologies are influencing a different kind of decisions behind almost every purchase.

Many people who are living near the store visit it and purchase their favorite items from the store, in short, the majority of the sale is still being done in the store. While their online home page is not less than a store. Many different people buy through their online website by sitting at home or those who are not living near this store. There are many of the online shoppers who are finding multiple positive reasons to visit a J.C. Penney store. Almost there is a ratio of 80 percent of online orders which are touching the store.

Although, the motive behind the JCPenney’s mission statement is to deliver the excellent quality of product and service to its customers but still it needs to put a due effort in stabilizing its objectives and strengths. Due to these weaknesses, long-term survival is at the stake and steps must be taken in order to address and combat these issues. For which aspects like value chain and return profitability must be talked about more.J.C. Penney is a department store that is a leading destination for the style and value both. In the last few years, they closed almost 140 chains due to several different reasons. This is a store that is making something different from the market and that attracts the customers. Due to their hard work and unique ideas, they made significant progress in their growth initiatives from the last two years.

The aim of the JCP is to be first and foremost for its consumers and to provide customer-oriented retail therapy to its buyers.

Future of Organization of strategic audit of  jcpenney

Having a look back at 2019, this department store reported an almost 9% decline in sales. In March, they made a sudden decision to imminently shutter down almost 27 stores in 13 of the different states. There is no doubt that the competitors of this department store, Macy’s and Kohl’s also reported the same slumps in the sale. Later on, JCP also shared a decision that will be related to the shifting focus especially on soft goods like clothes. This decision is being taken to meet the expectations of different customers in a different and better way. Through this profit, the ratio can be increased as well. JCP is a department store whose shares have been fallen more than half in number since the spring season. Christmas is the time of the year when different department stores offer different sales to attract customers and this time is considered to be the peak period where owners of different stores or brands can make enough money. There are many of the investors who don’t even see any kind of gains or profits applying to the JCP store. Last year it was seen that sales at the departmental store fell almost 1.3% instead of increasing. So there are huge changes this year as well that the retailers will have a tough time. The future of the JCP is bleak and it is very important to take action not just an action but a quick action.

The ever-present threat to the Amazon website:

The strategy should be done by the owners of the JCP store which can easily reconnect with the consumers around the different states who seem to be uninterested towards the mid-tier retail position, they should counter with the Amazon as it continues to consume the world. Amazon is even famous around the world and it can make customers attracted to the products again.

Becoming a penny stock of strategic audit of  jcpenney

JCP is a store that is trading only under $1 per share and it is considered to be a warning sign for all those brands or departmental stores who trade under $1 per every share, still, the penny is not completely in the danger zone of being delisted all of a sudden. They still have time to make their reports better. NYSE doesn’t start the delisting process until or unless the stock gets closed under $1 for 30 trading days consecutively.

All this doesn’t mean at all that the JCP is out of the danger zone and the owners should stop worrying. This troubled departmental store needs to start showing up the signs opposite to and proves that yes it can attract customers once again like in the previous years. This store is under heavy debt and it is exceeding above $4 Billion while they have a very little amount of money in their bank. So, they must start generating more cash.

Ulta beauty of strategic audit of  jcpenney

It is the top beauty destination for many teenage girls. They feel incomplete without having their cosmetics in their lives. A survey was being done by the Piper between two different brands which are Ulta and Sephora. 31% of the people chose Sephora while 34% chose Ulta beauty products. It is shocking as well as bad news for the JCP store as they are only relying on the Sephora brand with their store to attract the customers. They need to see the latest demand and choice of customers. This is a kind of red flag for the JCP store. They need to review different surveys regularly.

Above mentioned is just one example, they should not just review the surveys being done on the beauty products but other different things as well. They have multiple varieties in their departmental store and they must change or upgrade them according to the choice as well as the need of the different customers. Sale can only be increased when customers get attracted to their products.

This is a wakeup call for the staff of JCP. They need to get active and make more effort. They should try to think about the different strategies through which they can get the attention of customers back. This store used to be one of the leading stores in different states but now they lost all the fame. To regain it, they have to wake up and start doing their work actively or unfortunately their store will be delisted.

 The business opportunities provide a competitive advantage and it can be considered as a driving force for the organization. It is important to consider the time and services of J. C. Penney Company to achieve the goals of the company. In the present situation, the already existing external environment is allowing the company to grow speedily, overcome the weaknesses and then neutralize the threats presented to the company by the environment.

To make the company strategically stable numerous factors need to be focused upon. The new strategies introduced will help the company to walk on the steps of success by improving the financial expectations of the organization. The action items must be recognized and identified in the case of task ownership and strategic planning. Each employee must be trained according to the situations prevailing.

The Company can work upon finding new means of transportation for its goods and products so that it can save its major chunk of time and money not only for itself but consumers too. Resource Allocation must be the foremost part of the strategic planning instead of focusing on the cost’s reductions. This will help the company to reach sky-high success as it will control the overall picture of the market scenario.