We visited a JCPenney store a day after its CEO resigned abruptly, and it was a complete mess

Advertisement
We visited a JCPenney store a day after its CEO resigned abruptly, and it was a complete mess

JCP

Business Insider/Mary Hanbury

Clearance racks at JCPenney.

Advertisement
  • JCPenney's CEO, Marvin Ellison, resigned from the company suddenly on Tuesday.
  • Ellison, who became CEO in 2015, was tasked with bringing the department store back from the brink of financial disaster.
  • Analysts say his departure could signal a lack of confidence in JCPenney - and in department stores in general. We visited one of its stores in Manhattan to see what it was like to shop there.

The man behind JCPenney's turnaround is out, and now investors are wondering what will happen next.

On Tuesday, the department store announced that its current CEO, Marvin Ellison, is resigning to lead home-improvement retailer Lowe's as its CEO. Ellison joined JCPenney in 2014 and became CEO in 2015.

He launched a turnaround effort to bring it back from the brink of financial disaster. His immediate predecessor, Ron Johnson, tried to make the store more upmarket but alienated core customers in the process, leading to a $1.42 billion operating loss in 2013 and nearly $5 billion of debt.

Ellison had seen some success, but analysts say he's jumped ship before the job was finished. In the past few years, sales at JCPenney have stabilized, and Ellison has worked to reduce its debt load. However, the retailer still carries $4.1 billion in long-term debt.

Advertisement

"The departure of Marvin Ellison from JCPenney could not have come at a worse time for the beleaguered department store chain. The turnaround program that Ellison put in place has partly delivered but is still far from complete," Neil Saunders of GlobalData Retail said in a note to clients on Tuesday.

Moreover, analysts are now speculating whether his departure signals a lack of confidence in the store's future.

"Ellison's exit will raise speculation that he is not particularly optimistic about the future prospects of JCPenney and sees the grass as being greener at Lowe's," Saunders wrote.

We visited its only location in Manhattan, situated in the Manhattan Mall near Herald Square, to find out what it is like to shop there:

{{}}

JCPenney is the anchor store in the mall and opened in 2009. Today, it is spread over two floors.

JCPenney is the anchor store in the mall and opened in 2009. Today, it is spread over two floors.

Source: Dallas News

The entrance to the store was confusing. It's split into two sections on either side of the escalator.

The entrance to the store was confusing. It's split into two sections on either side of the escalator.
Advertisement

Downstairs is the kids', teens', men's, and homeware departments. The first thing we noticed was how chaotic the store was.

Downstairs is the kids', teens', men's, and homeware departments. The first thing we noticed was how chaotic the store was.

The sheer volume of clothing was shocking.

The sheer volume of clothing was shocking.
Advertisement

Racks were stacked closely together, which made it very hard to shop the store.

Racks were stacked closely together, which made it very hard to shop the store.

We were completely overwhelmed.

We were completely overwhelmed.
Advertisement

The majority of the store was on sale, which was concerning. There were also dedicated clearance sections offering 70% off.

The majority of the store was on sale, which was concerning. There were also dedicated clearance sections offering 70% off.

It wasn't just JCPenney's own-label products that were on sale. Well-known brands such as Dickies, Nike, and Levi's were also on promotion.

It wasn't just JCPenney's own-label products that were on sale. Well-known brands such as Dickies, Nike, and Levi's were also on promotion.
Advertisement

Retailers are increasingly focusing on offering customers more curated selections of clothing. With this in mind, it's hard to imagine how JCPenney can compete.

Retailers are increasingly focusing on offering customers more curated selections of clothing. With this in mind, it's hard to imagine how JCPenney can compete.

It didn't matter what section we were in — the store was brimming with inventory.

It didn't matter what section we were in — the store was brimming with inventory.
Advertisement

Ellison has led the charge to bring appliances back to stores. They were rolled out to 500 stores in 2016, following a 33-year hiatus.

Ellison has led the charge to bring appliances back to stores. They were rolled out to 500 stores in 2016, following a 33-year hiatus.

The idea was to cash in on the collapse of rival department store Sears, attract first-time millennial homebuyers, and shift focus away from declining apparel sales.

This was definitely the more glitzy part of the store, but the red sales tags were a warning sign.

This was definitely the more glitzy part of the store, but the red sales tags were a warning sign.

JCPenney claimed that appliance sales were the strongest area of growth for the company in 2017. Home department sales accounted for 15% of the company's sales in 2017. This was up from 13% in 2016 and 12% in 2015.

Advertisement

JCPenney's decline under Johnson was partly due to a drop in sales of homeware. It was the leading seller of window treatments and blinds in the US for decades. By 2014, it was capturing just 12% of home business compared from 21% in 2007.

JCPenney's decline under Johnson was partly due to a drop in sales of homeware. It was the leading seller of window treatments and blinds in the US for decades. By 2014, it was capturing just 12% of home business compared from 21% in 2007.

Ellison believed that by bringing this section back to life and adding appliances, it would strengthen homeware and replace a previously unproductive space.

The homeware section was one of the less chaotic areas of the store, and it offered some impressive services.

The homeware section was one of the less chaotic areas of the store, and it offered some impressive services.
Advertisement

We went upstairs to the entrance floor, where womenswear and a Sephora store-in-store was located.

We went upstairs to the entrance floor, where womenswear and a Sephora store-in-store was located.

Ellison has been rolling out Sephora in-store beauty spots aggressively, as this drives traffic to the store and attracts customers who might not otherwise choose to shop at JCPenney.

Ellison has been rolling out Sephora in-store beauty spots aggressively, as this drives traffic to the store and attracts customers who might not otherwise choose to shop at JCPenney.
Advertisement

It was a similarly chaotic scene in womenswear.

It was a similarly chaotic scene in womenswear.

It was especially surprising given that we visited the store only an hour after it opened in the morning, before most shoppers would have made a visit there.

It was especially surprising given that we visited the store only an hour after it opened in the morning, before most shoppers would have made a visit there.
Advertisement

There was a ton of clothing in the clearance section.

There was a ton of clothing in the clearance section.

The styles didn't seem to be resonating with customers.

The styles didn't seem to be resonating with customers.
Advertisement

Behind the scenes, inventory seemed to be mounting.

Behind the scenes, inventory seemed to be mounting.

Shoes were haphazardly placed on the racks, similar to an off-price store.

Shoes were haphazardly placed on the racks, similar to an off-price store.
Advertisement

But this wasn't really a treasure-hunt experience.

But this wasn't really a treasure-hunt experience.

Our verdict: This store had an overwhelming amount of inventory. The clothing was cheap and had the added bonus of being on sale, but customers didn't seem to be biting.

In some parts of the store, it was hard to distinguish between the clearance racks and the full-priced clothing, given that everything was on sale. In other areas, we were impressed by how neatly the clothing was laid out given how much there was to keep tidy and how closely packed in it was.

It's clear that Ellison's departure will come at a difficult time for the brand.

Next StoryMore people are using Starbucks' mobile payment service than Apple Pay, Google Pay, or Samsung Pay