Jcpenney swot analysis 2019

COMPANY PROFILE

JC Penney Company Inc

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JC Penney Company Inc TABLE OF CONTENTS

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TABLE OF CONTENTS

Company Overview ........................................................................................................3 Key Facts.........................................................................................................................3 SWOT Analysis ...............................................................................................................4

JC Penney Company Inc Company Overview

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Company Overview

COMPANY OVERVIEW

J. C. Penney Company, Inc. (J. C. Penney) is a holding company, which operates a chain of department stores in the US and Puerto Rico. The company offers a comprehensive range of apparel, home furnishings, accessories, footwear, hand bags, jewelry, shoes, watches, beauty products, and bed and bath products. It provides services such as salons, optical centers, portrait studios, jewelry repair, custom decoration, flower bouquet shops, and gift cards. The company operates an international purchasing subsidiary, which maintains purchase and quality assurance offices in foreign countries. It also offers merchandise through online websites including www.jcpenney.com and www.jcpenney.net. J. C. Penney is headquartered in Plano, Texas, the US.

The company reported revenues of (US Dollars) US$12,019 million for the fiscal year ended February 2019 (FY2019), a decrease of 6.6% over FY2018. The operating loss of the company was US$29 million in FY2019, compared to an operating profit of US$179 million in FY2018. The net loss of the company was US$255 million in FY2019, compared to a net loss of US$118 million in FY2018.

Key Facts

KEY FACTS

Head Office JC Penney Company Inc 6501 Legacy Dr PLANO Texas PLANO Texas USA

Phone 1 972 2431100 Fax 1 302 6555049 Web Address ir.jcpenney.com Revenue / turnover (USD Mn) 12,019.0 Financial Year End February Employees 95,000 New York Stock Exchange Ticker JCP

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SWOT Analysis

SWOT ANALYSIS

JC Penney Company Inc (JC Penney) is one of the leading retailers in the US. Efficient supply chain, omni-channel presence of the company and diversified product mix are the company’s main strengths, whereas lower inventory turnover ratio remains areas of concern. Growing online retailing, capital expenditure initiatives and growing apparel market in the US are likely to provide growth opportunities to the company. In the future, Expansion by rising labor wages in the US, regulations and intense competition could affect its growth.

Strength

Diversified Product Mix Omni-Channel Presence Efficient Supply Chain

Weakness

Inventory Turnover Ratio

Opportunity

Growing Apparel Market in the US Growing Online Retailing Capital Expenditure Initiatives

Threat

Intense Competition Regulations Rising Labor Wages in the US

Strength

Diversified Product Mix

JC Penney offers a diversified product portfolio, which gives it a wide customer base. The company’s merchandise mix includes women’s apparel, men’s apparel and accessories, home, women’s accessories, including Sephora, children’s apparel, footwear and handbags, jewelry and services and other. In FY2019, the contribution by these categories to the total revenue of the company has been 22%, 21%, 14%, 13%, 9%, 8%, 7% and 6%, respectively. The company is an exclusive retailer of brands such as JC Penney , JCP, Liz Claiborne, Claiborne, Okie Dokie, Worthington, a.n.a, St. John's Bay, The Original Arizona Jean Company, Ambrielle, Decree, Stafford, J. Ferrar, Xersion, monet, Disney, MSX, Eva Longoria Home, jeans by Buffalo, Black Label by Evan Picone and nicole by Nicole Miller among others.

Omni-Channel Presence

In order to meet the growing needs of customers, the company follows an omni-channel approach, which helps in driving growth. JC Penney focuses on improving the shopping experience for its customers by investing in technology and resources to support various channels of shopping, including in-store, smartphone, desktop and tablet. For instance, in response to growing usage of mobile devices for shopping, the company developed a new JC Penney application for iPhone. Nearly half of all jcpenney.com traffic comes from the mobile channel, hence this new application further enabled the

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company to drive growth. This new application help customers shopping inside a JC Penney store find coupons and apply them at the register. The new application also allows users to scan an item's barcode to access product information and customer reviews, as well as determine its availability online or at nearby stores. Furthermore, the company offers various delivery options to its customers. JC Penney is also focusing on providing a same-day pickup option to its customers, which builds on the existing pickup in store capability. The company offers free same-day pickup in most of its JC Penney stores in the US and most orders can be shipped to any JC Penney store in the country. The company also offers same- day delivery option in selected markets. With a strong focus on providing an enhanced shopping experience to its customers across all its channels, the company is well-positioned to attract a larger base of customers, which, in turn, helps in increasing product sales.

Efficient Supply Chain

JC Penney has a well-diversified supplier base, which helps it control its dependence on suppliers. The suppliers of the company comprise numerous domestic and foreign vendors with none accounting for more than 5% of its net purchases. As of February 2019, the company operates through a network of 864 department stores in 49 states of the US and Puerto Rico with a total retail space of 95 million sq. ft. J C Penney operates 11 distribution centers, one each in the states of Connecticut, Kansas, Ohio, Georgia, Nevada, North Carolina, Utah; and two each in California and Texas. These distribution centers are responsible for a substantial part of J C Penney merchandise supply to the stores. Strategic placement of these stores ensures quick merchandise delivery and low transportation costs.

Weakness

Inventory Turnover Ratio

JC Penney reported weak inventory turnover ratio during the review year. The decline in the turnover ratio and higher inventory turnover days signify that the company incurs high inventory carrying costs, which affect its operating performance. In FY2019, JC Penney reported inventory turnover ratio of 3. It reported lower inventory turnover ratio compared to two of its major competitors, Nordstrom Inc and Target Corporation (Target) which reported inventory turnover ratio of 5.1 and 5.9 in FY2019. Lower inventory turnover than competitors indicates that the company takes more days to clear its inventory in comparison with its competitors. With the given turnover ratio, JC Penney takes 122 days to sale its inventory compared to 72 days by Nordstorm and 62 days by Target.

Opportunity

Growing Apparel Market in the US

The company could benefit from the growing apparel market in the US. JC Penney offers sportswear, handbags, shoes, cosmetics, men’s clothing and accessories, women’s couture and designer apparel, designer jewelry, decorative home accessories, and children’s apparel. In September 2019, the company launched St. John’s Bay brand outdoor lifestyle apparel products for men. According to in-house research report, the US apparel industry grew by 1.2% in 2017 to reach a value of US$327.2 billion and it is further

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expected to reach US$351.5 billion in 2022, growing at a CAGR of 7.4% during 2017-2022. The womenswear category generated US$170.9 billion, accounting for 52.2%, the menswear generated US$101 billion, accounting for 30.9% and children’s wear category generated US$55.3 billion, accounting for 16.9% to the total apparel industry in the US. The growth was essentially the result of purchasing power of young middle class people, technological advancements and increasing popularity of online shopping.

Growing Online Retailing

With the increase in interactive methods and limitless content, the retail e-commerce is growing at a faster rate. According to in-house research, online retail sector in the US is forecast to grow at a CAGR of 8.5% during 2017-22 to reach US$447.4 billion by 2022 from US$297.8 billion in 2017. Multi-channel retail was the leading mode of sale in the US retail sector in 2017, accounting for 58.2% share, while online pureplay accounted for the remaining 41.8%. The US accounts for about 32% of the global online retail sector value. The retailing of electrical and electronic goods was the largest segment in the sector in 2017, which accounted for 35.7% of the total value, followed by apparel retail (22.6%), home and garden products (12.1%), food and grocery retail (11.6%), furniture and floor coverings (4.2%), and footwear (3.5%). Other category accounted for 10.3% of the value. The company merchandises its products online through www.jcpenney.com. The use of smart phones, tablets and other internet enabled devices contributed to growing E-commerce market.

Capital Expenditure Initiatives

The company stands to benefit from its recent corporate restructuring initiatives. In FY2019, JC Penney invested US$392 million for restructuring the business. It primarily invested US$141 million on store renewals and updates; US$129 million on capitalizing software; US$109 million on technology initiatives and US$13 million for the opening of new stores and relocation of existing stores. During the review year, the company opened one new store and closed nine stores. In FY2020, JC Penney announced its plans to invest US$300 million to US$325 million, with major focused on retail store, e-commerce and information technology projects. These initiatives will help it decrease operational expenses and enable to better deploy its resources, which result in increase in operational profitability.

Threat

Intense Competition

The retail industry in the US is highly competitive. JC Penney competes with traditional department stores, upscale mass merchandisers, internet and specialty stores and other forms of retail commerce. The major competitive factors include style, quality, price, merchandise mix, brands, service, customer experience and convenience. The company competes directly with larger retail players such as Kohl's Corporation, Nordstrom Inc, Sears Holdings Corporation, Macy's, Belk Inc and Neiman Marcus Group Inc, among others in many of the markets it operates. These retailers have large market presence and larger economies of scale, which provide greater power to negotiate for better margins with vendors. Therefore, the company will have to constantly differentiate itself from its competitors through efficient and in trend merchandising, and attractive promotional programs in order to retain its market share.

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Otherwise, intense competition could drive away its potential and existing customers which could result in drop in revenues and profit margins.

Regulations

The company is subject to various regulations governing the internet, e-commerce and electronic devices in addition to general business regulations and laws. These include regulations are related to taxation, privacy, data protection, pricing, content, copyrights, electronic device certification, electronic waste, consumer protection, the provision of online payment services, the design and operation of websites, and the characteristics and quality of products and services. Currently, the US Supreme Court decisions restrict the collection of state and local taxes for Internet sales. But, a number of states and the US Congress have been considering initiatives, which could limit the Supreme Court’s position regarding sales and use taxes related to Internet sales. If these initiatives are successful, JC Penney could be required to collect sales and use taxes in additional states or change its business practices. The imposition of taxes by state and local governments could create administrative burden on the company.