This action might not be possible to undo. Are you sure you want to continue?
EDITED TRANSCRIPT JCP - JCPENNEY ANALYST MEETING DAY 2
EVENT DATE/TIME: JANUARY 26, 2012 / 2:00PM GMT
THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us
©2012 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.
JANUARY 26, 2012 / 2:00PM, JCP - jcpenney Analyst Meeting Day 2
CO R P O R AT E PA RT I C I PA N T S
Kristen Blum JCPenney - EVP, Chief Technology Officer Ron Johnson JCPenney - CEO Mike Kramer JCPenney - COO Michael Francis JCPenney - President Michael Dastugue JCPenney - EVP, CFO
CO N F E R E N C E C A L L PA RT I C I PA N TS
Todd Duvick Bank of America Merrill Lynch - Analyst Adrianne Shapira Goldman Sachs - Analyst Bernard Sosnick Gilford Securities - Analyst Greg Melich ISI Group - Analyst Matt Boss JPMorgan - Analyst Charles Grom Deutsche Bank - Analyst Bob Drbul Barclays Capital - Analyst Deborah Weinswig Citigroup - Analyst Carla Casella JPMorgan - Analyst
P R E S E N TAT I O N
Unidentified Company Representative Ladies and gentlemen, please take your seats. Our meeting is about to begin.
Kristen Blum - JCPenney - EVP, Chief Technology Officer The discussion this morning includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which reflects the Company's current view of future events and financial performance.The words expect, plan, anticipate, believe, and similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties. And the Company's future results of operations could differ materially from historical results or current expectations. For more details on these risks, please refer to the Company's Form 10-K and other SEC filings. Also please note that no portion of this presentation may be rebroadcast in any form without the prior written consent of JCPenney. Replays of today's webcast will be available for 90 days. For those listening after January 25 and 26, 2012, please note that this recording will not be updated and it is possible that the information discussed will no longer be current. And now I would like to turn it over to our CEO Ron Johnson.
Ron Johnson - JCPenney - CEO Good morning. For those of you who were here yesterday that was not Ellen DeGeneres reading.That was Kristen.Welcome, thank you for coming. We had a great day yesterday, just a couple of interesting points.
1 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us
©2012 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.
Mike? Mike? Thanks. We talked about a new store design we'll start rolling out in 2014 and so those are some of the elements of our transformation plan. there were 20 times the number of people listening in of any previous JCPenney investor conference. Over the last four years. Our plan today is I'm going to say a few words. I see a lot of familiar faces. We're going to change our brand corporate identity and create a whole new personality for the Company.jcpenney Analyst Meeting Day 2 As we said yesterday that was our largest in person investor meeting ever. Michael Francis. cargo shorts and a big moose splashed right across my chest. what are the potential returns? And so today we're going to turn over to the more of the financial portion of the meeting.COO Thank you.JCPenney . So imagine my surprise when six months ago.com | Contact Us ©2012 Thomson Reuters. is prohibited without the prior written consent of Thomson Reuters. And then beginning in the fall. That will continue for three or four years until we complete the complete merchandise with JCPenney and shops. it was announced that Ron Johnson was going to go be CEO of JCPenney. And then Michael Dastugue. and we appreciate the interest in what we're doing here. which moves to fair and square.streetevents. and that will start on August 1st. But I think over the last four years since I left Abercrombie and Fitch. but the best at what we do. which are called Town Center which brings a new feature to retail that's never been done. The thing we didn't talk about was what's it going to cost? A little bit of how long it will take.clearly being a mentor of mine and I'd call him every now and then and ask him for advice. So I think that that gives me a unique perspective on the department store industry. Mike. and Mike Kramer will deliver a presentation to address a lot of that. And we'll begin our monthly cadence. Mike Kramer and I will come up on stage and take your questions. I actually ran a company that provided branded product to the department store industry. we do 12. All rights reserved. I've actually -. All right? And at the same time we talked yesterday about an all new concept for our retail stores. And I'll elaborate that on a little bit. and then I'm going to turn it over to our Chief Operating Officer. So in the seven years that I left Apple. Ron. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. including by framing or similar means. And then we'll come back for the Q&A. And especially over the last four years. I was wearing flip flops. And because of that for the first time ever this conference. 2 THOMSON REUTERS STREETEVENTS | www.We -. I think the last time you guys saw me. . 2012 / 2:00PM.That all starts next week on February 1st.JANUARY 26. My first response was elation because I knew him as a leader. And the way we're going to do that is we're going to rethink everything we do and try to position really JCPenney for the next century to put us in a leading position in the retail industry by being not just competitive at everything we do.well. Mike Kramer . thank you for being here today.100 stores. which quite frankly was very frustrating to me as a branded provider. All right? So thank you for coming and let me introduce Michael Kramer at this time. JCP . So for all of you listening in. all right? But just for those of you that weren't here yesterday. And this fall we'll roll out ten unique shops that will go to all 1. I stayed in touch with Ron Johnson. and we're thrilled that you can see this in person. and I was excited about him coming to the industry. we announced our plans that over the next four years we will completely transform JCPenney with an objective to become America's favorite store. is being broadcast streamed live over the Web. this morning this meeting. Good morning. we would engage in conversations about my frustration on trying to grow my brand through the department store industry and the frustration that I had not only because the market share was declining. Republication or redistribution of Thomson Reuters content. so we're going to now have values that last for an entire month and rather than doing 590 events. Michael Kramer to give you a financial update. we'll start to roll out all new merchandise initiatives that will be done in a shop format. we're going to change our pricing strategy. but because of the resistance to change. And on the telephone lines yesterday and on the Web. And we think that's pretty great. And we announced that beginning next week. It's really good to be back in front of the financial community here in New York.
What's interesting is if you bifurcate out specialty mapped discounts. There were several brands sold through the junior's department. yesterday Ron told you that 99% of the spending didn't go anywhere.This is actually a slide that you saw yesterday. I could understand mass discount. Compare that to the average specialty store chain does roughly $31 million in marketing spend. But I'm going to delve a little bit further in here as it relates to my frustrations. given the fact that brands four and five continually perform poorly. is prohibited without the prior written consent of Thomson Reuters. some seasons it was two. you know. my brand performed in the top three. the department stores had major advantages over that same two decades. Now. We talked. Some seasons it was one. And I'll be damned if he's going to do it without me. I remember conversations with Ron where we'd talk about it because how possibly could they be losing market share because the playground or the rules weren't even. the department store made almost as much money on them as they did with mine. Ron's not only going to transform JCPenney. And over the course of the conversation. here's a story I'm going to tell you. 2012 / 2:00PM. When I was at Kellwood. . 3 THOMSON REUTERS STREETEVENTS | www. Why? Because of vendor kickbacks. The industry's starved for leadership. It wasn't an even playground. condense that into another phrase if you will and that phrase is they lost sight of the customer. I noticed that brands four and five were constantly performing in the bottom. And I asked them. some seasons it was three. Even though those two brands performed at the bottom and that they were unproductive brands. JCP . I had a junior's brand that I sold through an unnamed department store. my wife actually entered into the room. Ron really told you a little bit about that and it was the deterioration of the six Ps. And it's a powerful slide and really speaks to the frustration that I had in terms of providing product to the department store industry. She sits in the chair and out of the corner of my eye. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. a scowl was forming on her face. She was right because I basically had my bags packed before the phone call was over. for those of you that know Ron.JANUARY 26.com | Contact Us ©2012 Thomson Reuters.The answer back to me? Not so fast. his passion is at a very high 24/7. specialty represents 37% of that now as compared to the 31% of department store and the 32% for mass discount. Clearly Ron showed you that the department store was declining 50% -. When you take a look at the two largest P&L line items. Rent per square foot on average the department store pays $4 a square foot. but what I cannot understand is now that specialty is the king of the road. After the phone call I looked at her and I said. was the passion that he exuded. because I knew him pretty well. He talked to me about his vision with JCPenney. Season after season. but there were five key brands.streetevents. kind of. Those two things just make me wonder how possibly did the leadership of the department stores allow this to happen and especially because the playing field wasn't level? Well.This first thing out of her mouth was. I actually see her. How can this be? I mean. why don't you excuse them from the assortment and give me that space and thus a win for both of us in driving the productivity.jcpenney Analyst Meeting Day 2 Fast forward one month. Republication or redistribution of Thomson Reuters content. And quite frankly obviously I was honored that he would ask me to part of his team again. Now. But what I'm going to do is. Now. but what really got to me in terms of that conversation. The average department store spends $1 billion in marketing spend. what's the problem? Because I knew that she adored Ron. He's going to transform the industry. including by framing or similar means. well at least you could've played hard to get. I sat there and I thought. and he wanted me to come onboard with him. Look at that advantage the department store has. And as I hung up the phone. So in my effort to try to grow my business. I went to the unnamed department store. Another perspective of that phone call was as I was talking to Ron. All rights reserved.has declined 50% in market share over the last two decades. but I saw a passion in him that I hadn't seen in him for such a long time. clearly because she knew something was up. Interestingly enough. Specialty store on average is $40 plus. I received a phone call from Ron Johnson.
She's stopping at H&M.jcpenney Analyst Meeting Day 2 Now. 2012 / 2:00PM. But what excites me most about this simplistic model is it allows our merchants to do what they do best and that is focus on great product versus focusing on pricing cadence. and it cascades so on and so on. But now I've got two of them. is prohibited without the prior written consent of Thomson Reuters. but based on the numbers it wasn't going anywhere. it gives us a new opportunity to look at our planning and allocation. Republication or redistribution of Thomson Reuters content. In recap. The combination of those two really allows us to not only simplify the business. which they were spending a large portion of their time doing. interestingly enough after the presentation yesterday. there was this real need to look at. every brand might have a bad season. My question back to them is don't you care that she's walking out of the store with a bag in her hand? Because quite frankly the reason why it's a short term play and you saw the market share decline is because after about four times going into that store and not coming out with a bag. even bigger in terms of some of the large specialty stores that you saw in the '80s and '90s that didn't work.What I'm going to try to do today is clarify a little bit for you in terms of the blueprint as it relates to the economics in what he talked about yesterday. I want to talk a little bit about culture. I'm really happy that I'm going to be part of the solution. You actually see anchor stores that are Forever 21. Lastly. Now. yesterday Ron laid out the blueprint for the transformation of JCPenney. 24/7. You now see specialty store actually taking square footage that was once dominated by department stores. And because of the complexity of the model that was laid out yesterday. breathing organization obviously. But in any case. She's stopping at Forever 21.The culture that we inherited was really a management-focused culture versus the tomorrow culture of leadership-focused. Specialty store has been eating into our productivity. what I want to talk to you about and what excites me the most about what Ron laid out yesterday. And you heard yesterday that Michael talked about the elimination of unproductive brands. Long story short. I think that to a large degree JCPenney was a living. I've been very fortunate to work for some companies with some amazing cultures. I'm sitting there thinking of the dollars that are going to go away or allow us to reinvest.com | Contact Us ©2012 Thomson Reuters. That's actually a short term strategy because they've lost sight of the customer. What do I mean by that? Well in terms of the management. But season after season after season I don't understand. Now. . H&M. I'll get into a little bit more detail about that. so you can imagine what my day is like. 100 shops within the stores. Let me just tell you they don't make enough Red Bull for me to keep up with both of those guys. I can understand that on a temporary basis. wow that was amazing. including by framing or similar means. Clearly it gives us an opportunity to take a new look at our merchandising organization. We were doing 590 promotions. I had quite a few people come up to me and say. I got used to working with somebody at such high energy level. 4 THOMSON REUTERS STREETEVENTS | www. is that it dramatically simplifies and enhances the profit formula. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. And quite frankly over the six years that I worked with Ron at Apple. dig in from an excessive granularity perspective and to try to figure out ways that they can actually better the business. Simplification going from 400 plus brand to 100 stores. but let me give you a comparison of the culture that we inherited versus the culture of tomorrow. We are going to listen to the customer. We're moving to 12 promotions.streetevents. All rights reserved.JANUARY 26. And that you might work with a vendor and be able to maintain that through a vendor kickback. what I'll tell you is the battle's not over. Now. yes. do analysis to look at more. she's no longer going in there. yesterday what Michael and Ron said and communicated was a clear marketing and pricing strategy. And because we're going to take a new look at merchandising organization. JCP . Are Ron and Michael always that energetic? The answer to that is. but to simplify the infrastructure that supports that business.
clearly. and he's going to be helping us in terms of really solidifying this blueprint as it relates to the expense structure and matching it up with Ron's blueprint. Dan worked with Mickey Drexler in building the team during the hay days of the Gap. So what we call that excess granularity.That transcended to more reports.There was no payback. reported 27% SG&A of their net sales. we're not going to be able to get all of that day one. When we took a look at it during the last 90 days. we're confident that we can reduce our SG&A as a percent of sales to a sub 30% rate by 2013. Now. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. That represents $900 million in savings as it relates to the new operating model. I'm not calling out anything that you guys haven't been calling out. We're going to be moving to one promo packet a month.5 billion more of operating infrastructure than our friends up north. Now. in 2010 we reported an SG&A structure of roughly 33% of our net sales. and I understand why they did it.Where can we gain that efficiency? What's the detail of that? Non-politically correct is where can we cut costs? I'm going to give you some examples. Well. but we'll get a portion of that in 2012. more people. Clearly with the new strategy.jcpenney Analyst Meeting Day 2 But what would happen was is this excessive granularity they wanted more reports. So what excites me today is about the simplification of that. Now. a very similar volume company. We're doing it because it's the right thing for the business. What we found with regards to excessive granularity. but for obvious reasons I'm not going to go into a lot of detail. Steve Jobs talked him out of retirement and he came onboard when Apple was in his quote. this can be -. that's not the whole picture.JANUARY 26.the reason why I'm introducing Dan is because he's really my partner in crime in terms of the last 90 days of really digging into the infrastructure and layering it all on to the blueprint that Ron and Michael have laid out. hired a great team including Ron Johnson. Clearly. Well.There was no payback to that. but what I don't understand is that they -. So what did we find out over the last 90 days? Well. what did we do about this? Now let me just be very clear here. week by week. Well. JCP . we're not looking at simplifying this organizational structure to meet some number from a competitive perspective. 2012 / 2:00PM. The amount of labor in the store that it took to re-price the keystands. Republication or redistribution of Thomson Reuters content.advertising $300 million and home office $200 million. we kept looking and we kept looking and quite frankly we are very strongly committed to the fact that we can reduce our SG&A structure to 27% by 2015.com | Contact Us ©2012 Thomson Reuters.streetevents.over the course of the time they didn't look at it. For those of you that don't know him. All rights reserved. Now. day by day. more reports. So this simplistic model that we're moving to will really allow us to free up the organizational structure to do what's best for this Company. So I'm going to give you a little bit of examples. Dan comes to us with a great track record. more analysis.we can benefit from this immediately. including by framing or similar means. That 6% differential represents $1 billion. amounts to a savings of $50 million. is that enough? Well. Then they wanted more people. Now. Dan. Dan kind of went into semi-retirement. he gets a call from Ron. But what I saw was the fact that there's savings in the stores. there's savings in advertising which is a mainstay with regards to our strategy. 5 THOMSON REUTERS STREETEVENTS | www. we call that false precision. there was roughly $500 million that was attributed to margin that actually were classified as SG&A at some of the other competitors including Kohl's. in the gutter. On average. Kohl's. can you stand up? For those of you -. So Kramer. So quite frankly if you look at apples-to-apples. monetize that for me. At this point in time I want to actually introduce somebody and he's going to kill me for doing this. we were running an $18 billion business on $1. . So that $900 million run rate will not be effective till 2013. So let's talk about the big hitter stores.When we took a look at the P&L. is prohibited without the prior written consent of Thomson Reuters. and was very instrumental in the transformation of Apple. our stores would receive three promo packets a week. we've actually highlighted this so there's roughly $400 million of expenses in the stores level that we can cut over the next year -. They wanted more analysis. but it is Dan Walker here. What Ron showed you yesterday was the fact that the customer was getting bombarded and that 99% of the time she wasn't listening. to re-price the product.
Now. Now. we have 36 cash wraps in our stores. that represents $90 million.000 employees. Of our 150. let's think about this.900 employees are housed here.JANUARY 26. This is accounts payable. And that is only the top 682 stores. The beautiful thing is a majority of what we've highlighted today will take impact 2/1/12. that 2% differential represents $360 million. guys. Now. But if we actually move to -. Texas. then the next question is.jcpenney Analyst Meeting Day 2 Let me give you another one. So as you can see. and the average span of control is four? So this is one of the things that Dan and I are really digging in deep and that we have a plan for home office.900 hours to operate.move the needle to eight direct reports in terms of the span of control. But quite frankly. that represents in 2012 a savings of $200 million. because I think Michael did a great job of it yesterday in terms of in 2010 we reported 6% of our sales was diverted towards advertising compared to Macy's at 4% and Kohl's at 5%. again. Republication or redistribution of Thomson Reuters content. including by framing or similar means. JCP . if you take a look at the stores that are comparable in terms of the size and volume with regards to Kohl's. And that's what we're going to do. 2012 / 2:00PM. if you carve out those cash wraps. no. This is IT.They were used primarily for peak periods. Now. Here's one large example. the run rate of $900 million to hit in 2013. that's $250 million. almost the entire opening hours of the store for customer service. On average. is prohibited without the prior written consent of Thomson Reuters.streetevents. Advertising. All rights reserved. well. This is planning. Now. who I think does a pretty good job in terms of operation. This is allocation. That difference of 600 hours. I'm not going to go into a lot of detail here. It's going to stay in Plano. you say.com | Contact Us ©2012 Thomson Reuters. we'll be able to free those dollars up and take a look at whether we want to [redivert] it to other marketing and advertising or actually flow through the bottom line. but what's interesting here is when we dug into this what we found was this accepted granularity created an environment that had eight levels of management when the average retailer has five to seven and the more simplified retailers only have five. well.500 hours to operate these stores. will allow us to operate at a sub-30% SG&A rate in 2013. you extrapolate that out over the stores that actually are represented in terms of close comparisons to Kohl's times 52 weeks times the $12 average wage rate. This is actually a picture of our headquarters in Plano and. the average span of control was four.We staffed them. why not take them out? Replace them with productive selling square footage and quite frankly handle the peak operating hours through portable technology. It's right around the corner. 6 THOMSON REUTERS STREETEVENTS | www. almost 15% of our home office spending. And what was even more highlighted to me was the average span of control in terms of our home office and our support functions. we didn't want to leave them empty.000 to 170. we're not moving our headquarters anywhere else. let's compare that to Kohl's. the beautiful thing about this is this goes a long way to help self-fund the transformation. If we were to run at a 4% rate. . these processes of simplicity and really thinking through what's the right thing to do is really coming back in terms of savings. We believe in a flatter organization not a fatter organization. We're looking at the process for the other 400 stores. why didn't you leave them empty? Well. This is actually a picture of our cash wrap. We didn't want the customer coming up to an empty counter. So clearly there are savings here But what's interesting here. Now. let me give you an example of when we dug through and looked at the processes to identify that $250 million. I talked about that accepted granularity and the impact of the mushrooming effect as it relates to that. That $900 million that we're going to achieve over two years. Home office. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. On average. compared to the average retailer of eight. what Michael and Ron believe is that over time we can actually incur more savings because we need that in 2012 to re-educate the consumer with regards to the pricing strategy. So over time. that is a savings in labor of $100 million. if you do that math of what Michael talked to you about yesterday in terms of the $80 million a month. our average store it takes 2. we can do immediately and we are going to do immediately. Those same stores only take 1. Interestingly enough. roughly 5. Now. Now. I'm not going to get into a lot of detail for obvious reasons. because this is such a heavy hitter. What we found when we dug through is that nine of those cash wraps were rarely used.
including by framing or similar means. But we've layered that cost model onto our fleet to really hone in on what the real amount's going to be. Now. Now. almost double or over double. One is what Ron talked about yesterday. we are not going to build cubes.streetevents. But more importantly.com | Contact Us ©2012 Thomson Reuters. it represents the purchase and inventory of a lot of these pictures as we roll out in a very fast cadence into 2013.100-store chain. we know that our 1. no. of what we think that the cost is going to be. We feel strongly that we can achieve those. I said today that we're confident that we can get to 27% SG&A structure by 2015. and we are not going to have surfaces of granite and stainless steel.There's a lot in there. Let me just tell you being in the industry that's very rare. we are confident that we can fund this by cash flow from operations and clearly our optimizing of our expense structure helps us a long way to actually accomplish that. that's pretty amazing that we will absolutely be able to transform JCPenney in a timeframe that's right around the time for your son or daughter to actually graduate from college. 7 THOMSON REUTERS STREETEVENTS | www. Now. You saw that nice flipping calendar.jcpenney Analyst Meeting Day 2 Now. Clearly. And. our teams have dug in and have been working with design firms. clearly. And the reason why I'm not going to tell you that number is we believe that the number that I have in the model that allows me to tell you comfortably that we're going to self-fund can actually get better because we're working with the vendor community as it relates to the fixtures.The reason I tell you that is don't extrapolate $800 million. there will be the completion of the 100 stores. So what does this mean to me? Well. These guys understand return on invested capital. And we know that to transform these into Ron and Michael's vision that some are going to cost more than others. But more importantly. we clearly have some idea over the course of the four years what the sales productivity increases are going to be. But what I will tell you is we are going to spend $800 million in 2012 as it relates to the transformation. Sales. doing the math that represents a 13% contribution. And a lot of it is because of the cost engineering that we're partaking as it relates to these shops. what they laid out yesterday was actually the shops that we're going to roll out within our 1000-plus stores. I'm actually surprised at how low that number is. Now. is prohibited without the prior written consent of Thomson Reuters. And let me just tell you there's two reasons behind that. And more importantly. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. The beautiful thing about working for Ron and Michael is they're both right brain and left brain. Ron said yesterday he's confident that we can get to 40-plus margins. Ron laid that out for you yesterday. I'm not going to tell you what that number is. and what I'm talking about in terms of the operational infrastructure will be fully complete by 2015. All rights reserved. This $800 million represents the transformation of the first ten shops. for us to come out and tell you that we're confident that we can self-fund this transformation. JCP . Republication or redistribution of Thomson Reuters content. . We are not going to have glass stairs. we know that we have a 1. They've been working with vendors. That's in stark comparison to the 6% contribution that JCPenney provided in 2010. the transformation that Ron's talking about. We're working with our brand vendors to determine their investment in this. and I'll get back to that.This is some IT initiatives. So that number can only get better. I've been able to identify. I'm not going to really tell you what those are because one reason is we don't want to really cap what we think it really could be. Now this in comparison this is $800 million in total to the last couple of years we've been spending $500 million to $600 million. But. I know what you're thinking. clearly. Each store is going to be different. what don't we know? Here we go. It also represents investments as it relates to the store experience. So you take the fleet. Now.100-plus stores are in different states of new versus old. We've even been working with our product vendors to really understand the cost as it relates to this 100-shop rollout. Now. the secret sauce. What will it cost? Well. Now. by December of 2015. as Ron said. over the 90 days. 2012 / 2:00PM.JANUARY 26. of which we're going to impact all of them. within a tight range. those stores. Here's what we know.
yes. today. Republication or redistribution of Thomson Reuters content. JCP . Now. Now.You can buy it at Amazon. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.com. well. but in terms of the opportunity cost of expenses and the opportunity cost of non-operating assets and whether we should monetize those or divert those expenses to provide a higher level of return on investment capital. Now.com | Contact Us ©2012 Thomson Reuters. . Let's go back to the secret sauce because this is the big key. And just think.16. Historically. It's on every street corner. So if you take that and exponentially calculate what that can do. let's talk about guidance. as we're bringing in great brands in terms of shops over the course of those four years. but quite frankly.or quarterly sales consistent with the majority of the industry. we didn't lay out any of the details of that. I was in the store this week in one of the stores in Dallas this week and buying my son a 4X and clearly because of my loyalty I bought it there. is prohibited without the prior written consent of Thomson Reuters. Yes.That's what the secret sauce is. the profitability as we can expand into those markets. JCPenney has roughly 400 stores in those same markets that Kohl's has 722. with this more efficient operating model. the interesting thing to me is when you take a look at our fleet. you can imagine what that can do.That represents just a comparison of roughly 300 more stores that we can do. Ron.You can buy it at Best Buy. he grew over a ten-plus year timeframe a business from $0 to $15 billion. And what I mean by that is not what bank we're in. we've been providing guidance on a quarterly basis. But you could actually see that in full working order when you walk into an Apple Store. we've arrived at -. Ron talked a little bit about this yesterday.JANUARY 26.jcpenney Analyst Meeting Day 2 Two is clearly. we think that we can double our return on invested capital over the next four years. you can buy that product elsewhere.Well. But what he didn't mention yesterday is you can buy it cheaper. Sephora as an example. Clearly. Now. Go-forward we're going to report monthly -. And remembering his analogy is like gas stations on every corner. but quite frankly he was very modest. by the numbers that I've shown you today. And being his partner in crime for the six years at Apple. 2012 / 2:00PM. I've actually had people say to me. But what I will tell you is our guidance for 2012 is to meet or exceed 2010's EPS of $1. including by framing or similar means. but that's to come. we've been talking about sales productivity. but the DNA within those four walls of that entire experience is Ron Johnson.com. Yesterday. 8 THOMSON REUTERS STREETEVENTS | www. Now. The product's amazing. How possibly did he build a $15 billion business when that exact same product can be bought down the street much cheaper? And quite frankly. return on invested capital. Historically. And I think that's really important to understand as we roll out this transformation and when you take a look at the upside potential. We got no preferential treatment as it came to product allocation either. And clearly. Well. this was the case the entire ten-plus years. it's a phenomenal product provided by [Steve and Co]. And as we start to see success with regard to this transformational model is it's going to become even clearer to really understand where we're parking our cash.59 adjusted $2. All rights reserved. Ron saw me in his office quite a bit screaming about it. I could have bought it $10 cheaper at Amazon. like I said. But I went online. I think a lot people could have done that. and that's what's really exciting about this. If you take a look at the top 50 markets out there. he laid out the strategy in terms of the service element and how that's going to be critical to this strategy. Why is this important to us? Because we believe that we're going to be able to provide better shareholder return in a year of transformation than what we did in 2010. I could have bought it $10 cheaper at Best Buy. this is really part of the DNA of the new team. as we're rolling out Sephora we're seeing a 2% lift in the rest of the store. But as Ron mentioned yesterday. Go-forward we are going to eliminate that and only provide guidance on an annual basis. So he built a $15 billion. Now. the product is amazing. we've built in a sales productivity level that we're very comfortable with.we've been reporting sales on a monthly basis.streetevents. I would subscribe to you that Ron built a $15 billion business getting people to buy premium gas. there's actually a growth story here in terms of square footage.
That's the recap. But I can tell you from our past lives and those people that you know me from Abercrombie & Fitch. But what's even more exciting is we're going to provide constant change and newness to our customer month by month. Now. Ron. 2103. Michael Dastugue is our long-term CFO. because I know what you're thinking. our President.JCPenney . including by framing or similar means. there's a lot of change going on this year. Republication or redistribution of Thomson Reuters content. Dan and team really want to be very transparent. we're going to simplify but we're going to take action now. Stronger performance during the back half. and you're going to see that. Michael. we're not going to commit to anything that we're not confident that we can get. Man. JCP . We're going to reinvest and we're going to self-fund it. But we're confident with regards to this new simplified model that we're going to be able to meet that commitment. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Mike. I'm Ron Johnson.streetevents. So let's really walk through -. Ron. we wanted you to have time to think about what were the key questions. we're going to get to sub-30% SG&A expense rate.text us your questions in advance and we would try to hit the highlights before we opened up to a general Q&A. if you -. we are going to have a face-to-face Q&A within five days of the earnings call. He's going to be up here today. And we actually set up a system where you could Web -. And this is Mike Kramer.jcpenney Analyst Meeting Day 2 Now. Now. we're a new management team and we've got to build the credibility. And thank you for your presentation. This is a management team with a bias to action. Michael.let's recap. . 2012. and we're going to transform this Company by 2015. myself.CEO For those of you who weren't here yesterday or attending your first investor conference. All right? The first question -.JANUARY 26. QUESTIONS AND ANSWERS Ron Johnson . and then you're welcome to come up to the microphone and we'll take open questions at the microphone.I think I need my clicker or can someone click it for me please? A very common question was this. meet or exceed 2010 EPS. We've talked about a lot of the changes that really impacting the last part of the year. Ron talked to you about the changes in the back half of the year and the unknowns in terms of the front of the year in terms of how the customer was going to respond to the new pricing strategy.JCPenney . All rights reserved. Mike Kramer . how much do you expect your sales to decline initially? What's the breaking point do you think? How far will you let sales decline before you make a no-go decision? 9 THOMSON REUTERS STREETEVENTS | www.com | Contact Us ©2012 Thomson Reuters. Michael and Michael to join us upstage so we can get to Q&A. Pull up a chair.I have three things that if you take away really what you heard yesterday and what you heard today. This is Michael Francis. is prohibited without the prior written consent of Thomson Reuters. the team will be there face-to-face to be able to answer questions that you have and that we're cognizant of the fact that we need to provide to you a level of detail for you to understand that we're meeting the glide path as it relates to this transformation. So I'm going to leave this as a backdrop for Ron. given those changes. Ron Johnson . You're familiar with Michael. We're going to invest $800 million in CapEx. the reason we split the investor meeting today from yesterday is with all the change going on. So yesterday.the four of us will walk through five questions that were seen very common that we'll try to address. And so I'm going to walk through -.COO Yes. 2012 / 2:00PM.CEO Really appreciate it. clearly. And 2015 transformation complete and self-funded.JCPenney . So what we're going to do is Q1 through Q4 of 2012. But we want to be very transparent.
We are not guiding to sales monthly because quite frankly we want to run the business for the long term. But the other thing is there are many elements of the transformation that kick in throughout the year. which will cause improvement. as we -. there's some interesting information that I'm not going to share in detail. So to help you understand that. but it'll be dramatically different in the fall. and we are going to stick to it. We do have a promotional strategy. See. And we don't really know exactly what it will be. and every day we learn more. Each month we'll reinforce that. And so we expect improvement in the back half compared to the front half. as merchants always have. that'll be done item by item. If we have to make an adjustment to the price. So the real question is how long will it take for the customer to understand the pricing strategy. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. like in the month of May when everyone will be marketing shorts and swimwear. But the simplification of our pricing strategy is a key piece of the transformation and that decision is made. but without any marking. But we've got a new way to do clearance. and better. It is grounded in a very strong understanding of consumer behavior and exactly at what price points you like to buy. We are making the decision next week to change our pricing strategy. And then we operate clearance like everyone does. And I don't want anyone at JCPenney to have pressure at a monthly target when you're trying to execute a long-term strategy. and we expect that to be dramatically better. but we've started to change our pricing over the last four weeks. And so the customer will know that they can come whenever they want to get the key items of the season at great value. regardless of the initial response. Republication or redistribution of Thomson Reuters content. we'll be at our best price of the year the entire month.people talk about us everywhere. without any sign. next week we'll get our first true read of the customer reaction to our pricing change. It's just driven by a monthly cadence and not another.We think this is a huge competitive advantage. our merchants with a different direction are having a great time with new products.com | Contact Us ©2012 Thomson Reuters. as television out there. as Ellen DeGeneres starts to talk about our pricing. All rights reserved. It will get better over time as our marketing accelerates. JCP . Michael Francis yesterday shared with you the enthusiasm he has and I share over the merchandise improvements. and we're at a point right now where most of the merchandise in the store has been changed to the new pricing. Twice a month on the weekends when people get paid. . But wherever they start. we will have an event to bring people into the store. I'm not sure I fully understand. but wherever it starts we have high confidence that it will get better. So we have made the decision to change our pricing strategy. 2012 / 2:00PM. historically. That is a permanent change.JANUARY 26. and better.streetevents. including by framing or similar means. As we go through the year. is prohibited without the prior written consent of Thomson Reuters. right. And we want to have the ability to react and adapt to the business as best we can to move the transformation along. is I think what people are asking? And what's the risk initially? All right? Well. And on February 1st.jcpenney Analyst Meeting Day 2 Now. 10 THOMSON REUTERS STREETEVENTS | www. So we're going to stick with them.We're seeing improvements in merchandising. we've got to establish credibility. We clearly have guided with an expectation that sales will be softer in the beginning than they will at the end. And so we have been reading regular priced selling at JCPenney's now for 30 days. We believe in those in the long run. And so we will have great everyday prices that are essentially about 40% below where we set the prices last year and exactly where the customers started to buy in volume. just like the marketing is so different from what we had in three months. all of our changes. As he said yesterday. Right? Now as we did our guidance for the year. they'll get better. while they are going up and down. All right? And so that's kind of our feeling about sales. and merchandise presentation in the spring. Then we'll have month-long values so the customer can shop on her terms. So those are the things that are going to drive our pricing strategy change. which we call best price Fridays. the last 20 years retailers have just put the clearance on the floor. clearly customers will come to understand the value in our pricing. which will actually drive people to the store to buy clearance.
This year. to make them more efficient. guys. I think we made it pretty clear. but it's also for technology improvements and other capital improvements. So we're hoping to get a lot of capital support from vendors to help with the transformation because this is truly in their interest.is that over time you can really engineer things. is prohibited without the prior written consent of Thomson Reuters. How can you become the store for everyone with [no names] or no brands that will attract customers? Well. and so they're going to want to participate. and let me try to explain this to you. Now. the reason we are going month by month. All right? So the capital question is $800 million today. and it will depend on how much vendors participate. And we've learned through Sephora. Anything to add to that. when you do that. typically a retailer. we will have enough cash flow from operations combined with our current balance sheet. too. Republication or redistribution of Thomson Reuters content. of the cash flow that we generate in the next few years will go towards funding the transformation at JCPenney. And we are open to have them invest capital to make these shops even better. But we are very strong believers in our pricing strategy and in the year ahead. self-funded. and we think that can provide benefit to all stores. but I learned a lot there -. How much will this transformation cost? How much capital will you be spending each year during the transformation? Will it be over $1 billion? All right. JCP . if you put in one Sephora shop it brings a new customer to that store. Let's go fix these stores because they're the oldest stores. So we are transforming 1.100 stores. because while it might be good for that one store.advance the opportunity to transform the business. but it will get us the 10 shops by the end of the year. shop by shop. and we expect to have earnings that exceed 2010 during the transformation. to fund the changes we're going to make. one of the exciting things yesterday was we had -. we'll understand exactly how much to invest to get the return on invested capital Michael talked about in these shops. and we expect the efficiency to go down as our improvements go up. we are going to get these things lower and lower cost as we learn. So vendors are really excited about this idea of price integrity. and they've already demonstrated that through their enthusiasm. So when we roll out two shops a month.100 stores simultaneously by adding shops. . and we had a dinner last night adjacent to here. And so when we build these first shops. that we're going to start layering in new shops August 1st. those questions were asked before Michael's presentation. That's what they love to do. and as you saw yesterday they're designed with a very simple fixture. presenting merchandise well. 2012 / 2:00PM. No? Okay. A significant part of our capital. as Mike said. Well. We had over 1. the key thing for an investor to know is we are going to self-fund the transformation.streetevents. As the shops start to perform. The third question. including by framing or similar means. when they invest in capital to improve a store. you really don't transform -.JANUARY 26. Okay. it doesn't help all the other stores. Well. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. But the real secret here is that -. At the pace we plan to do. those are the kind of questions. they go to all 1.jcpenney Analyst Meeting Day 2 So we're committed to our pricing. right? And you've seen that. will remodel the entire store. Right? But we believe we can self-fund. we'll spend $800 million in capital. Now. we were hoping for more brand launches to be allowed -. And so the amount it's going to cost long term depends a lot on how well we can engineer these shops. 11 THOMSON REUTERS STREETEVENTS | www.com | Contact Us ©2012 Thomson Reuters. the second question was about capital. All rights reserved.to be announced yesterday. I hate to refer. with regard to brands. we expect it to get better as the year goes along.you might not know this. That total is not for shops. And the merchants said the big problem now is that we've got too many shop ideas.000 people here yesterday. and I think Michael made it very clear. and there's a spillover effect on the entire store. which is for shops. All right. but we had two presentations like the one many of you attended with all of the vendors of JCPenney. And so we're going to be transforming month by month.another thing that I learned at Apple.
and Martha Stewart. because a lot of you talk to the market. . But it doesn't serve us well competitively to share too much of that in these early days. that the best marketing is word of mouth. we want that to be news at that time and not news today. We want there to be an incredible competition for space. And if you look at JCPenney's inventory turnover -. And secondly. So when we launch new partners.We want to be really thoughtful and punctuate the calendar as we move forward and celebrate these launches as we bring them to life. the lead story on Yahoo! last night was JCPenney's pricing strategy.we turn our inventory at the same revenue per store significantly slower than our competition. Republication or redistribution of Thomson Reuters content. 2012 / 2:00PM.We want to bring the best designers to the world. Right? So we don't want to announce these things until they're ready to come because we want to choose from the best of the ideas. Now. Well. A couple of other comments. because we want to save that for a little bit later. like the men's business is about 22% of our total. Scarcity is our friend. is prohibited without the prior written consent of Thomson Reuters. Now. after we announced Izod there are 21. new shops. and we're open to the world. JCP . We only have 100 shops.com | Contact Us ©2012 Thomson Reuters. to aggregate all that news into one headline today doesn't help us to maintain our momentum.President Yes.JANUARY 26. All right? But there's a lot of work under way. like we did with Sephora and Mango. Michael Francis . including by framing or similar means. my observation is we carry a lot of inventory in our stores.JCPenney . Vendors are saying that JCP orders are down 10% to 15% for spring 2012. Well. Are you planning sales down that much? And if not. and we want to make sure month by month we've got new news to share. So there are 22 opportunities in the men's department. not what we know today. And so we're not talking about the brands today. new brands.we didn't have time to detail today -. you might conclude they must expect the sales to be down. something that I learned from my time at Target.jcpenney Analyst Meeting Day 2 Now. right? There's no better dream in the world for a manufacturer than a controlled merchandise environment. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. We talked about Arizona. the truth is we have reduced our commitments to vendors for the early part of the year. So those are other elements. I think yesterday we alluded to the fact that we shared a variety of concepts that we're going to be launching later this year and into next. when you start to divide that in the store. that's wonderful. 12 THOMSON REUTERS STREETEVENTS | www. right. evaluating other concepts where we have already determined that there's interest in partnering with either a designer or a national brand. And so it was interesting yesterday. And we alluded to the fact that there are 30 distinct work streams under way right now. there are 20. And we talked yesterday how we're going to clean up the stores to reduce the clutter. we want to take the best global brands and bring them to Penney's.streetevents. because ultimately it's the combination of us plus all of the creative people in the world that are going to make these shops come alive. and my favorite marketing is free. but we don't want to make those decisions today. because that's going to help us engage with the media and help us amplify this message and help us maintain our momentum. A fourth question was on vendors. many of those are going to be brand new to JCPenney. Well. All rights reserved. and we fully intend to share that news as it comes online and as we move forward with that execution. because everyone's talking about what's this new pricing strategy? That free marketing will help us with the transformation. how do you drive sales up on less inventory? Interesting. Ron Johnson . Now. right? We want to take our current brands or private labels and make them great brands. but the last thing that we want to do is to close the door on our vendors. Well. like we're doing with Nanette Lepore.CEO I've learned from my career.JCPenney . We want to let the market help us. But those are important competitive issues that we want to focus in on and ensure that we're being very thoughtful about how we communicate and maximize our reach and continue momentum.
Bank of America Merrill Lynch . is prohibited without the prior written consent of Thomson Reuters. I think we're still in a great position. . 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. and we work for the long term interests of our shareholders. What it means is we want to turn our inventory faster. Michael. We have -. But I really believe in credibility. that would be very helpful to me and the team. Todd Duvick.3 billion in short-term cash investments and then about another $150 million of cash in transit.streetevents.com | Contact Us ©2012 Thomson Reuters.Analyst Thank you. All rights reserved. Bank of America Merrill Lynch. Right? Sometimes the street guides ahead and we miss the street guidance. I don't think we have anything at this point. So with all of the transformation going on. It sounds like with the self-funding strategy that you have. when you make the most money is when you chase the business. We continually talk about that with our Board of Directors. Now. I think with regard to our balance sheet. QUESTIONS AND ANSWERS Todd Duvick . and you want to get in a position where you are chasing the next ideas. Can you talk to us a little bit about how the management team is thinking about its credit rating. don't you think you are setting the bar too high -. Michael Dastugue . JCP . CFO Thank you. I come from a company that hasn't missed guidance 25. So those are the questions that were submitted in advance.jcpenney Analyst Meeting Day 2 We believe we can take our inventory down and have a better use of capital while still maximizing sales. Where you don't do well and where you have markdown issues is when you get heavy on inventory.or be careful not to set the bar to high during the transformation. I think there's probably some members of the rating agencies here today. and the previous management team and Board of Directors had been very intent upon getting back to an investment grade credit rating. Todd. if you have any credit metric targets or anything along those lines? Thank you. you're probably not going to be relying as much on the debt capital markets maybe going forward. and we all know that.JCPenney .The most important thing to me in our relationship with shareholders. so I wouldn't want to speak on their behalf. Obviously.CEO Go ahead. The secret to that is credibility. Republication or redistribution of Thomson Reuters content. So if orders are down it doesn't mean the sales expectations are down. all right? In my [system of ] retail. Each of us works for our shareholders. Ron Johnson . and there is absolutely no way that guidance for 2012 that we didn't have extraordinary confidence we could meet or exceed. we want to get in the position where we have liquidity. you inherited the balance sheet the way you inherited the business. and that's who we work for. 40 quarters. So I think in terms of an explicit target for leverage. I'd like to open the mike now to any of you who would like to address any other questions for us.JCPenney . I don't know what your reaction will be to the guidance we shared.probably end this week with about $1. but I just want to echo what Michael said. I had a question for you about the balance sheet.EVP. So just because vendor orders are down. where we can fund the growth of this business. And if you could introduce yourself. I don't think right now that that's really where we're at. 13 THOMSON REUTERS STREETEVENTS | www. And in terms of an investment grade guideline or a goal. So that's where I'll leave it. 30.JANUARY 26. 2012 / 2:00PM. which is currently below investment grade. Michael. which they are. it doesn't mean anything about our revenue. Guidance. including by framing or similar means.
As far as the people in the store. having the customer at the table with us. Ron Johnson . and broaden the range of consumers who currently list JCPenney as their preferred shopping destination. 14 THOMSON REUTERS STREETEVENTS | www. thank you.so much of the new strategy was designed while. whatever you like? Michael Francis .com | Contact Us ©2012 Thomson Reuters. you talked about the six Ps. I think I'd just comment I think yesterday -. as far as who's selling at JCPenney. One P that seems to be absent is the people. fundamentally. which you may want to comment on in a minute.JCPenney . But I don't think at this point in time we want to lay out any specific leverage. our people respond with great vigor and enthusiasm for what we've mapped out. We're seeing it in merchandising and design and our sourcing organization. I think that's going to rise the sales and profitability of all of our stores. . JCP . Ron and Michael. that'll transform our experience. first. So we believe that honoring our current customer and then developing a store environment and a merchandise assortment that's going to welcome new customers into the fold is a critical aspect of what we shared yesterday. Michael. is prohibited without the prior written consent of Thomson Reuters. And if there are opportunities to strengthen our balance sheet. not only from an equity position our returns. who's shopping currently at JCPenney. You're seeing that come through the marketing expression that we shared yesterday. we'll obviously consider that.streetevents. When we looked at the pricing strategy in developing fair and square. conceptually at least. and are they up to the task? And then I have a follow-up. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. And then I believe.CEO To build on that. All rights reserved. metric or investment grade goal. we want a very strong balance sheet. it was very much with our customer in mind. do you want to take the first half or I can.Goldman Sachs . as we look at our promotion cadence. I know Ron -.jcpenney Analyst Meeting Day 2 But I think all the things that Mike and Michael and Ron talked about over the last couple of days. 2012 / 2:00PM. The teams are prepared to win and excited to begin executing strategy in creating America's favorite store. And so while we self-fund we are monitoring the credit markets very carefully. Yesterday. Republication or redistribution of Thomson Reuters content.JCPenney . thank you. I guess my questions are.obviously that's key at Apple. when we look at our visual presentations. but it's also going to improve our credit profile. And it seems like people who are shopping at JCPenney and the people who are working at JCPenney in terms of selling. and how do you think this transformation changes who shops over JCPenney over time and where she's shopping today? And then the second. including by framing or similar means.Analyst Adrianne Shapira from Goldman Sachs. All right.JANUARY 26. who's in the stores making this happen. but also a lot in terms of execution. Adrianne Shapira .Talk about the execution.President Well. So we're absolutely seeing our teams. You're asking a lot of the associates to really transform the stores. Ron Johnson .CEO Well. I also would think broadly what we're seeing internally throughout the enterprise is our teams are more engaged and more passionate than they've ever been.JCPenney . tremendous transformation. which long term is going to improve both.
But we've got to honor and protect the customer we have. All rights reserved. So job one is to serve that customer better. we've begun the process yesterday of communicating to our stores. Now.com | Contact Us ©2012 Thomson Reuters. Does it make sense? So we're watching this very carefully. The next day. we live in malls and we monitor these brands. like changing signs. If you're in the industry. and it takes a long time to attract the new customer.You can't communicate too clearly or too frequently. But stores like -. And we've been here a short time. we think with good marketing and great products we can get her to check us out. and we talked about values.JANUARY 26.Goldman Sachs . Michael and I sat in a room about like this size. Right? So I think our stores are going to be incredibly enthusiastic about it. my hours are different. That's job one. I look at what they're wearing. So long term. And we shared with them our pricing strategy at that time because they had to change all the prices.JCPenney . 2012 / 2:00PM.jcpenney Analyst Meeting Day 2 Ron Johnson . When I go to JCPenney.Analyst Great.000 headquarter employees.streetevents. and then you also talked about merchants focusing on the product. And so everything we're doing is designed to reduce the work that is operational.people go into retail to serve customers. because just like we couldn't tell you. and that's how it works. But because we're located literally the length of this auditorium from the center of the mall in a lot of malls. So I expect them to embrace our change. But over time we know that we can serve all America. I'm sure there are some people that are saying. we'll start to recognize the clothes they're wearing.a big sales decline would be if we walked away from the existing customer.99 polo. Today you talked about that unnamed department store that was challenged because of vendor kickbacks. when you ask who is the customer. I wish I was doing this instead of that. when you do the right thing it's really energizing for the team. in groups of about 800. It also includes how we treat our employees. I think change is hard. We did that for an hour. and you probably know that they can afford to buy something more than a $9. okay. So they're just getting energized as we speak about all the new strategies. You can see someone in the JCPenney store wearing a Lacoste shirt. right? And we want to serve that customer. the key to me is fair and square is our business philosophy. One of the great mistakes retailers make through the years. And with a new merchandise direction. Republication or redistribution of Thomson Reuters content. I don't look at what they look like. so we can invest in things that you care about. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. And we took Q&A. is prohibited without the prior written consent of Thomson Reuters. But long term. how we treat our customer. including by framing or similar means. let me try to answer the first question. and we're not going to do that. So my very first thing I did my first day at JCPenney is we took all 6.CEO Adrianne. they confuse the existing customer who is shopping there. JCP . and you see it primarily in the specialty store industry. unfortunately. all of our merchants can do this. we couldn't tell them until now. some of the very first shops we roll out are for long-term JCPenney brands like Worthington and Arizona. . but we've spent a lot of time with the teams. right? But that includes. we sat outside. which is taking care of somebody. And you saw yesterday. Adrianne Shapira . And we care deeply about that customer. So the first thing we ought to do is keep every customer we have and serve them better. We don't take a sales -. And the customer in our store today is the customer who is interested in the merchandise that we carry today. Could you maybe reconcile that? Is that a change at JCPenney 15 THOMSON REUTERS STREETEVENTS | www. right? And on the people side. and we met hour after hour. and we're spending a lot of time trying to communicate. is a new merchant comes in. if I could? I talked yesterday about JCPenney having about 3% market share. especially during a transformation. with every employee in the Company to lay out the first things we're going to do. and that's our objective. And then my next question is for Michael.We know exactly where they bought it because. Right? And so we're going to do that. we can have any customer we want.
com | Contact Us ©2012 Thomson Reuters. She will no longer come back. We're going to share our growth with our vendors. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. [Steve Lawrence] and [Liz Sweeney]. and the vendor should focus on what they do best. I mean. and it's about the buying experience.President Well. it's a dream for vendors as they want to grow their brand. yes. what you really want to be in control -. all the interaction is on merchandise and winning with product and not managing profit margins. control your price point. Mike Kramer . I think that's incredibly important. And we shouldn't co-mingle our profit formulas. Right? It's way too complicated. And we ought to present and market and sell the product as best we can. and we should focus on what we do best.CEO Just one more.CEO Okay. It's about pricing integrity.COO Well. I mean.JCPenney . Ron Johnson. Republication or redistribution of Thomson Reuters content.actually. and we should just sell it. not making money through kickbacks. All rights reserved.jcpenney Analyst Meeting Day 2 maybe in terms of how you're working with vendors so you don't get into that situation that unnamed department store is and carrying brands that they shouldn't? Mike Kramer . so that unnamed department store was not JCPenney. And you saw the 50% demise in terms of the market share. I think that -. including by framing or similar means.JANUARY 26. And people love JCPenney's today.some of my best brands walk out the door at 40% off -. But the goal here.you've got to control -.personally I've never experienced that situation with JCPenney. JCP . as we grow our profitability we want to be the vendor's best partner. and I'm going to answer this. Michael Francis . what I've learned from some great brand builders. It's incredibly important for the woman to be pleased and walk out of the store with a bag. We should buy it. . like Mike Jeffries. I think one of the most broken things in the retail industry is the relationship between the vendor and the retailer.COO Let me just add to that. They should produce merchandise at the best price they can. because I think over time you'll wean her off. is that to control the growth of your brand. We have begun working with the vendors on that. that's what going to reward us with their best ideas. I got the nod from our two head merchants. because the department stores were using some of the better brands to bring people in. They ought to design and source and deliver on time the best product they can. I had product -. it was 40% off before it hit the floor. Ron Johnson . is prohibited without the prior written consent of Thomson Reuters. but we're going to do this. Over the last two years.streetevents. But what I will do is just echo what Michael Francis said is that we want our brands to be productive. let me -- Ron Johnson .you have to have pricing integrity. 2012 / 2:00PM. And with the shops and the pricing strategy that Ron has laid out. So we're heavily focused on that critical vendor-retail partnership.JCPenney .JCPenney . which is what I was. So again. And we are going to radically simplify the vendor process.That's really my only point. I want to make money off of pleasing the customer. because ultimately. is from a vendor perspective. Steve Jobs.They're kind of thinking it sounds too good to be true. what Ron is creating here is a dream for brand building. but we're going to make it simpler and better.JCPenney . quite frankly. 16 THOMSON REUTERS STREETEVENTS | www. too.JCPenney . We shouldn't have all these games.
let me clarify.let me just make one point to that. 2012 / 2:00PM. et cetera. but in the highest level we want to simplify.JCPenney . So our finance teams who manage that relationship have to manage 30 separate things that we're mailing.CEO All right.COO Yes. I promised not to go into that much depth on any more questions. but this is something we're very passionate about.President I'd just add that it's that approach which has allowed us in 90 days to have as many active work streams and collaborative ideas being developed with the vendor community.streetevents.JCPenney .President -.jcpenney Analyst Meeting Day 2 Adrianne Shapira . And I haven't been in the direct business for a little while. And that's my point. Michael and I were out on the West Coast meeting with the head of one of our big suppliers. It's just crazy. All rights reserved.Analyst I'm sure. 17 THOMSON REUTERS STREETEVENTS | www. Bernard Sosnick . .of transformation. And so I don't want to be absolute.Analyst You can go in depth with my questions. including by framing or similar means. There are times that we misdirected you. how many different things do we have to earn to get money back? And it turns out it was ten different items from advertising to presentation across three different divisions.that's where I'd like to go. But it's interesting -.JANUARY 26.JCPenney .That's what's enabling the speed -- Ron Johnson .CEO All right. I do disagree with it when it becomes a drug. When I talked to vendors about it. And so we just have to simplify. that's what -. and that's crazy.com | Contact Us ©2012 Thomson Reuters.JCPenney . proof of ads. Michael Francis . Ron Johnson . 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.JCPenney . Republication or redistribution of Thomson Reuters content. And I'll give you one more example. no markdown allowances at JCPenney? Ron Johnson . too. and I said now how complex has the business become? I mean when we buy a product. and we want to make room for new merchandise. is prohibited without the prior written consent of Thomson Reuters.Gilford Securities . Michael Francis .CEO Personally. Mike Kramer . I didn't say that I didn't believe in terms of the markdown contributions with regards to the vendors. so please go ahead. they said there are times we want to provide the markdown allowance. JCP .Goldman Sachs .That has been truly resonant as we get out there and work with the markets.JCPenney . So just to keep it simple.
Retailers operating in large spaces historically have wanted sight line visibility for the customer.JCPenney . She then went and redid all of Abercrombie's system. We're going to use labor to serve the customer. And I'm wondering if you can expand on those elements of your plan? Ron Johnson .jcpenney Analyst Meeting Day 2 Ron Johnson .Gilford Securities . So eminently shrinkage can be controlled through technology. It suggests to me. I'll take that. and the answer will be yes. Bernard Sosnick . which I think you have.CEO All right. RFID is a perfect example. It's through technology.Gilford Securities . RFID is ready for prime time. Bernard Sosnick .JCPenney . and so we are not going to use labor to protect the merchandise. Bernie.com | Contact Us ©2012 Thomson Reuters.CEO It's got to be a good one. Well. if you don't mind? The way to solve shrinkage is not through people. She was so good Apple put her into the supply chain.Analyst Gilford Securities. who is we think one of the smartest in the world at this retail technology stuff.JANUARY 26. I can't promise it will be.Analyst This is Bernie Sosnick. But we're going to deploy technology to solve problems such as shrink. 2012 / 2:00PM. JCP . Have you thought about the potential shrinkage problem. All rights reserved. So we are not at all concerned about that. because the key here is when you transform a business you've got to get people from doing task work to doing service work. Ron Johnson . that you're probably planning on having more people within the shops providing service. though. If you put walls up all over the store. All right? And we haven't talked yet about our technology business.JCPenney . you're going to have to have people watching the merchandise. . Republication or redistribution of Thomson Reuters content. Right? Electronic monitors -.CEO Sure.Analyst The other element that I was driving at is are you going to be putting more people into the departments to provide sales service because you did allude to the Nordstrom formula yesterday? Ron Johnson .Gilford Securities . including by framing or similar means. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. When merchandise has an RFID tag you cannot walk out with that merchandise. here's the answer. but we have just hired a new leader of technology named Kristen Blum. is prohibited without the prior written consent of Thomson Reuters. but also for the protection of their merchandise so you can watch what customers are doing.streetevents.JCPenney . Bernard Sosnick . Okay? 18 THOMSON REUTERS STREETEVENTS | www.there's lots of ways to monitor spaces without people.CEO Yes. She designed and rolled out the Apple Stores.
Ron Johnson . All rights reserved. by the way. Now.Gilford Securities .200 million signs. Ron Johnson . And I'm wondering -.com | Contact Us ©2012 Thomson Reuters. Each one of those not only had to be printed. Right? And that's the key here is we've got to find a way to get our hours engaged in serving customers.Analyst All right.CEO It's a good question. Last year. And we've actually developed training programs with them. 42%. 40% off. is prohibited without the prior written consent of Thomson Reuters. thanks.ISI Group . Well.Gilford Securities . correct? And so everything we do that improves efficiency is an opportunity to manage a shop.ISI Group . Greg Melich . look at the training. including by framing or similar means. but someone had to physically put that into the holder day after day. A perfect example is our Sephora shop.JANUARY 26. you talked yesterday about you want to be America's favorite store. and Sephora's actually adopted some of the things that JCPenney has done. JCP . And so shop by shop we'll be rolling out the right staffing for those shops.CEO Thank you very much.Analyst And then we've talked a lot about categories and brands and 100 shops and competing for 22 men's categories. 2012 / 2:00PM.Thank you.jcpenney Analyst Meeting Day 2 So a perfect example is our price change strategy that Michael alluded to. when we create these shop environments. If you go into the Sephora shop which delivers $600 in sales per square foot and look at the employees. Ron. ISI Group.Analyst That's what I wanted to hear. Republication or redistribution of Thomson Reuters content.JCPenney . one of the expectations that the employees in the shop represent that brand. When that goes away we get an opportunity to redeploy people.CEO Yes.maybe it's not in stage one. Ron Johnson . Greg Melich . that is not meaningful activity. 50%. but in stage three does the JCPenney brand and what you represent do you want to be in different categories? 19 THOMSON REUTERS STREETEVENTS | www. Bernard Sosnick .JCPenney .Analyst Hi. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. And that's what we're going to do. JCPenney printed 200 million individual 5x7 signs -.JCPenney . they have to meet the high bar of a Sephora employee. 50% off. Greg Melich. .streetevents. Bernard Sosnick .
JANUARY 26. But I really don't know yet. which is really Best Buy. well. So bringing the mix up is a big part of the transformation.jcpenney Analyst Meeting Day 2 I mean could that -. and I would just add to that in that in the last couple of months when we were developing our ideas and our perspective on where we may wish to go with new categories or new concepts. JCP . back in other things. And you see that in a lot of the industries. One of the things the department stores did is they reduced categories (inaudible) [appeared] when the specialty store and the big boxes really grew. Republication or redistribution of Thomson Reuters content. Like a perfect example is greeting cards. as Martha Stewart said yesterday when we were working with Martha. We know that because when the industry started there were ten regional discounters. A perfect example is the discount store industry has always had a great portfolio of products. All rights reserved. 20 THOMSON REUTERS STREETEVENTS | www. And we haven't detailed Town Square. But over time we'll experiment with a lot of things. I mean.President Yes. can you imagine a store of our size you go in to buy a gift and you can't buy a card to go with it? It's a highly profitable card.JCPenney . is allowing our merchandising and in fact our broader teams to get back out there and explore the world for the best concepts the way that great merchants and great department stores used to curate the globe and look for the best ideas. but Town Square will clearly bring services and activities that are not in our store today. So the theme keeps evolving. People like the mix of that store and the size of that store. and the answer is probably we'll have new categories. I spend a lot of time. ultimately to the customer they see a portfolio of products that meet their needs.CEO I think it is an exceptionally great question. hardlines. that are in neighboring locations. And so we're open to a lot of different types of shops. now we're back to a point where there aren't really big boxes. Remember when toys.streetevents. is prohibited without the prior written consent of Thomson Reuters. . We've been talking about it together. and we've been coming back. softlines that's attracted customers. It's a fun category.JCPenney . She actually has the whole area set up which she calls Celebrations. they got out of toys because of Child World and Toys R Us and others? Well. and I walk through different types of stores. Michael Francis . We have some really obviously voids in the assortment that just have to be addressed. there's one left. Is that how you're thinking about it now or is that something that's way in the future or something that we could actually see in the next few years? Ron Johnson . back in TVs. and we've been looking for consistencies. But we literally had people all over the world in the past 90 days. our traditional retail stores. including by framing or similar means.CEO Let me give you one more example because it's a good question. as we all do. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. but we want to curate shops that have great interest for the customer. All of them perform well. And each time I see something new I kind of say. 2012 / 2:00PM. but also our Town Square idea. but in the short run the new shops that we add will be primarily in the categories we do today and trying to do them better. walking in stores.of the 100 shops could we be back in electronics. [primarily] more appliances or you name it. even though they all execute it quite differently. And it's really wonderful merchandise. Ron Johnson . It's fashionable.Well. And I believe that what we've done is we created a compelling list of options and ideas which will inform not only our core assortment over time. the right mix of HBA.JCPenney . And because we have set up these environments you have more flexibility and shops don't have to be large. she said that (inaudible) in her whole life. And so we're exploring any and really all alternatives. would that make sense to a customer in the mix at JCPenney? See. And you look at consumer electronics.com | Contact Us ©2012 Thomson Reuters.
2012 / 2:00PM. that's a good question. but would there be a difference between stores located in more upscale markets than store in store opportunities for some of your lower demographic consumer markets? Ron Johnson . and we were talking about fashion merchandise and we were in Chicago.Analyst Yes. a guy named Philip Green who runs Topshop and others. .JPMorgan .I think I know where you're going. In most stores then they paid rent like a landlord would. Right? But localization will not be a primary strategy at JCPenney because I think that is something that is exaggerated in its importance.CEO Now.com | Contact Us ©2012 Thomson Reuters. Now that will be part of the Martha Stewart Store.Analyst Thanks. There's a company in a great department store in London called Selfridges.streetevents. as you go through that process could you envision a world where you would let the vendors actually have the -. JPMorgan. which really was one of the first department stores to transform itself. develop the product. JCP . could you speak to the potential for a localization initiative around some of the store in store opportunities? So you've spoken to the 100 store in stores by 2015. We were having -. You mentioned an opportunity longer term. is prohibited without the prior written consent of Thomson Reuters. that's true. And I said.do the labor in that shop or own the inventory in that shop or that fundamentally want that service element to ultimately be what defines JCPenney? Ron Johnson . We would consider any alternatives depending what the brand is. And for all the effort you can put into localizing. it gets back into the complexity that Michael talked about. but our primary goal is to manage the shops. do our job our self because that's where the highest absolute returns will be. how do you assort your stores from Shanghai to London to Chicago? And Philip Green said. Clearly we have large stores at Penney's and we've got small stores. staff the shops. Near term are there stores that you'd like to close? Is there a rationalization impact to this? I mean off mall versus off mall how would that look over time? 21 THOMSON REUTERS STREETEVENTS | www.Analyst And just a quick follow-on to that. including by framing or similar means. So let me try to explain that for those of you who might -. And it basically leased its space to a variety of stores in a lot of the models. and we just want the economics to support long-term shareholder value. Matt. Matt Boss. Now. I think the idea that what people want in Birmingham to Boston to Biloxi is exaggerated. My second question is around square footage growth. so we're going to have to edit the shop content by store. And so we're going to identify categories like that throughout the store that just make sense to be in that know will add to the value.JCPenney . Could you speak up a little.ISI Group . But with every shop we don't want to limit people.JANUARY 26.JPMorgan . All rights reserved. the world is flat. It takes away from your ability to do just great merchandise everywhere. or move closer to the mike? Matt Boss . right? And we'll have the ability to put the right shops in the right store we believe.jcpenney Analyst Meeting Day 2 And so we're going to be bringing in a whole new idea that relates to the greeting cards that you find at paper stores or whatever into JCPenney. Greg Melich . It's incredible. Republication or redistribution of Thomson Reuters content.I was in Chicago with one of the great retailers in the world. Let me take that on real quickly. We will consider alternatives. Right? And so we're going to focus on getting our content right for all 1. What people love in Chicago is exactly what they love in Shanghai.CEO Sure.JCPenney .100 stores and do that so well that if we miss a local item or two that's okay because the things we do well will more than offset the opportunity that you can find in localization. Matt Boss . 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.
JCP . Ron Johnson .Analyst Hi. And so the truth is when we improve the business with better pricing. better shops. And because of the economics that Michael shared. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. you know. And as I walked through the stores. And that's looked at by the economics of the stores. Oregon.JCPenney . including by framing or similar means. And it turns out we've been doing that at Penney's for a long time.com | Contact Us ©2012 Thomson Reuters. First of all. Ron. it's funny. That's what they love. Right? So job one is to raise the productivity of all our stores.JCPenney . it's a really interesting question. Matt Boss . .CEO Thank you. visually I said.Analyst The first question I have. these things look tired. And given your background -- 22 THOMSON REUTERS STREETEVENTS | www. Well. But you get back in Plano and you look at the financials. not the condition of them.JPMorgan .Deutsche Bank . That's their choice. But I don't think there's any need to go out and close those small stores. sure. Deutsche Bank. Ron Johnson . the one word I don't think I've heard you say yet today.They don't look that pretty when you walk in.CEO Yesterdays or today's? Charles Grom . I was in a small JCPenney store. boy. we actually generate cash flow. Right? And so we've got to look at all these store decisions on a return on invested capital basis. Charles Grom . How do you make them succeed? And the knee-jerk reaction is these don't fit the brand. sometimes higher because of depreciation. can you hear me? Charles Grom. is the Internet. is prohibited without the prior written consent of Thomson Reuters. I read a lot of interest in this online. and part is because in small towns that's what they know. that's going to improve the business everywhere. Republication or redistribution of Thomson Reuters content.JCPenney .JANUARY 26.and part of that's because we haven't invested in them. All rights reserved. And I was just out at Salt Lake City looking at small stores of different sizes. better products.CEO I'll take it. 2012 / 2:00PM. It's really insightful. I was in Medford.Analyst Great.Deutsche Bank . Are they going to close stores? With all those small town stores what are you going to do? And in my first three months now I have visited tiny Penney's stores in northern Wisconsin up at Rhinelander. And what we need to fund the transformation is cash flow. Eventually then we'll decide if there are some we can rationalize and improve. better marketing. $4 a square foot and sometimes lower.streetevents. They're small. great presentation. and they look really pretty because they actually generate good return because -.jcpenney Analyst Meeting Day 2 Ron Johnson . thanks a lot. I took a tour from kind of northern Washington down to Seattle.
So you'll see improvement in the online space starting next week and really accelerating through the spring.Deutsche Bank . Ron Johnson . Why haven't we talked about digital? Why haven't you talked about the Internet? We decided yesterday that two hours was as much as you guys could handle.CEO And let me -.Analyst No. And so we're doing a significant online business.JCPenney . . thank you. we have made a lot of investments in our digital strategy over the past 12 months at JCPenney. 23 THOMSON REUTERS STREETEVENTS | www.JCPenney .right about April 1st? So as you move through the spring we're going to have the ability to do a lot of different things that we could do in the past.CEO Anything to add? Charles Grom .Deutsche Bank . and so we decided to talk about the things that we're going to change immediately and some of the big things. But our online percent of sales is still about 9% where Macy's with all their growth I believe is at about 6%. And as Michael showed you.CEO Yes.com | Contact Us ©2012 Thomson Reuters. including by framing or similar means.Analyst -.CEO Yes. But the Internet is clearly a huge opportunity and something we have to be best at. Republication or redistribution of Thomson Reuters content. So just -.jcpenney Analyst Meeting Day 2 Ron Johnson .I'll just go one step further. So can you maybe a little shed some light on your strategy there? And do you see the ability to do site to store to door someday and use some of the excess footage in some of your older stores? Ron Johnson . and that's been related to our catalog decision and the furniture strategy. All rights reserved. Now.JANUARY 26.I think that's kind of intriguing. And you'll see that improve pretty dramatically in a variety of ways. JCP . And from our April -. is prohibited without the prior written consent of Thomson Reuters.Deutsche Bank . And we want to do better.streetevents. of our iPad app and our phone app. And then just on the -- Ron Johnson . Charles Grom .JCPenney .Analyst Okay.and you have a lot of respect for Nordstrom and kind of their strategy and one of the things they've done real well is the ability to kind of integrate the store with online.JCPenney . we're updating the look and feel of our online store. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Charles Grom . but we want to improve it.You can't be America's favorite store without having a perfect and the best multichannel experience. We have a real fall off in our online stores over the past year or two. And we're rolling out all new tools for our online store this spring and many of them start February 1st. 2012 / 2:00PM.
CFO I don't think we want to give that at this point so -- Charles Grom . Charles Grom .Deutsche Bank . Internet. They want to make sure the product's there so they can try it on. And people like that whether they just don't want packages at their home that someone might take. It's the integration with the retail store. And so we want to really work hard to be a leader in that. for example.JCPenney .CEO Michael D. If they don't like it it's easier to return without going back to the store.Thanks. 2012 / 2:00PM.16 was adding back the pension expense. Good luck.Deutsche Bank . Michael.Deutsche Bank . So but the guidance that Mike talked about does include the pension expense that we're forecasting for 2012.EVP. the $2.? Michael Dastugue .JCPenney . And we've got about another week before we close the books on the pension. fair enough. Okay. is prohibited without the prior written consent of Thomson Reuters. And then just -. and you can probably look at the capital market's information and know that it's been a tough year for everyone to pension.Analyst Right.just on the guidance.streetevents. I think the $1. So when we look back five to ten years from now we're going to be in the kind of cave people days of the intersection of the retail store and the online. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. mobile.com | Contact Us ©2012 Thomson Reuters. you can clarify just about a $0.JANUARY 26. . the magic of the online store is not the [buy and lie]. I'm just wondering if the $2. That's a really profound truth. And I don't think there's a single retailer today who has really figured out how to do that yet. Republication or redistribution of Thomson Reuters content. 24 THOMSON REUTERS STREETEVENTS | www.JCPenney . but we have not gone into detail yet. JCP .Deutsche Bank .and maybe. including by framing or similar means. though.JCPenney .16? In 2010 I believe you guys had -. All rights reserved.Analyst Sure. but would you expect the pension charge to be in the ballpark or? Michael Dastugue . I alluded to that yesterday because even at Best Buy.EVP.They might want help with the product when they get there. Charles Grom . and it relates to the importance of the physical environment. CFO Yes.Analyst Okay.CEO Ultimately. they publicly quote that 50% of the time someone buys online they pick up in store.59 was the fully burdened 2010 number and the $2.16 guidance is excluding a pension estimate charge for 2012? Ron Johnson .sorry. A lot of reasons why stores work and so the secret is how you marry the two.Analyst Okay. and I don't think we've figured it out yet.60 hit on pension. and we will be focused on that. And I would add that given our funded position we're not anticipating nor are we required to fund the pension in 2012.jcpenney Analyst Meeting Day 2 Charles Grom . I've got one more -. Ron Johnson .
but every day what's the reaction? And the merchants look category by category what's the reaction to the product? And we'll look at how they're selling to the prior year.CEO I'll answer that if I could.thank you.CEO All right. Bob Drbul. CFO Thank you. .Thank you. Thank you. Bob Drbul . great pricing.jcpenney Analyst Meeting Day 2 Michael Dastugue . I didn't look at them that frequently. And here we get them at least every day and in extraordinary depth. And that's why it's really important -.CEO One or two more because I don't want to keep people longer than they have to. JCP . so we're getting feedback all the time.President One or two more. including by framing or similar means.we're going to be back here at the end of the next quarter. And like most things in retail it's your intuition that has to be the guide. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Right? And so we're going to start monitoring. we learned this doing that. We get sales reports. And so we'll be learning an extraordinary amount starting February 1st that will inform every decision about the pricing strategy.JCPenney . 2012 / 2:00PM. And I think we have time? Michael Francis . 25 THOMSON REUTERS STREETEVENTS | www. Ron Johnson . We already are -. So like we set our store here in New York last week. good morning. but did you want to go first and then -. the timing of it? And how are you gauging the abilities of the transition that the business is going to undergo over the next several months and quarters for this year? Ron Johnson . The nice thing about retail is we get immediate feedback.JANUARY 26. Good luck. It's amazing. how do you gauge the impact and the effectiveness of what you're trying to do.Analyst Thank you. But we want to get some time under our belts to really provide that information so we don't have to go.Barclays Capital . Ron Johnson .JCPenney .Analyst Yes.JCPenney .Barclays Capital .EVP. and we've already got all the feedback day after day about the new sets. I like the new heights. But the second thing is you get extraordinary feedback from the employees and the store and the customers. and we want to meet face-to-face so we can put as much color on how the transformation is going as we can so you know and you can make your assessments. We think in 90 days we'll know a heck of a lot. Republication or redistribution of Thomson Reuters content. And we'll get feedback in a variety of ways. Right? And so this will be a largely intuitive thing to see how this transformation goes.com | Contact Us ©2012 Thomson Reuters. Two questions that I have is first on the education process around the consumer this year. but we're going to get a lot of feedback.streetevents. In my former job they were every four minutes on my phone. but anytime I want I can get feedback. well. is prohibited without the prior written consent of Thomson Reuters. The store seems so clean.JCPenney . Barclays Capital. Bob.JCPenney . Bob Drbul . informed by the information. All rights reserved.
mobile.and digital media -. So it's a fairly aggressive plan to apply not only predictive modeling tools. but one of the ways that retailers have driven usage has been special limited one-time hours and three hours here and it's good for 24 hours. . But just to remind you that the book is one of the tools. JCP . but kind of analytical tools as we assess the best way to ensure that the list is productive and we consistently apply that learning.but with regards to your private label credit card and obviously customer (inaudible) being increasingly important. and we're going to adapt because we want to get that message out. How do you intend to drive usage of the credit card? And then across channels.JCPenney . It'll reinforce the pricing and the items that are on value that month. and then there's also some clone modeling going on.or change our mix. So it will be determined where there's like customers out there that we want to send the book to with the goal of introducing JCPenney to a new audience. but it's not the only element. lots of radio.We'll be measuring effectiveness across the direct mail stream on a month by month basis allowing us to adjust not only the future book but all of the other direct mail which support our best price Friday initiatives and other outreach as we launch new brands.Citigroup . So there's lots of ways -.JCPenney .jcpenney Analyst Meeting Day 2 Deborah Weinswig . All rights reserved.CEO You'll receive a typical preprint.CEO Yes. Ron Johnson . and I think everyone will hear about it. and that's a composite of existing JCPenney guests.That'll be in all the new [art] direction. Ron Johnson .JCPenney . And then there are distinct cells for testing.JCPenney . is prohibited without the prior written consent of Thomson Reuters.streetevents.Deborah Weinswig. great paper quality. Each Sunday for three Sundays out of the month or four? Michael Francis .Analyst And one more question. Deborah Weinswig .Analyst Yes. can you maybe help us understand how you're building that list? Michael Francis . Citigroup -. That's kind of like there's an iPod.President Yes. I guess. e-commerce and stores how do you intend to have kind of a unique identifier if your customer isn't using their credit card? 26 THOMSON REUTERS STREETEVENTS | www. But $80 million is a lot of money to target toward one specific objection. number one as you look to form this mailing list for the book. This is a very focused message. is just that -. so we think the book is a core element. 2012 / 2:00PM. which is it's February at JCPenney. including by framing or similar means. Republication or redistribution of Thomson Reuters content. like Michael. so as we talk about the 3% market share you currently have and the market share you hope to get.lots of ways to reach customers.JANUARY 26.President Two to three Sundays in the month. And we're going to learn as we go. And if we can change our distribution for March we will -. lots of TV.com | Contact Us ©2012 Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.The book that we introduced yesterday will be direct mailed to 14 million consumers. two quick ones.Citigroup .
let me try to answer that. So I'm wondering if you can talk about the private brands and I guess how much of your sales you see of this sale shift from private brands in 2012 and then through 2015? Ron Johnson . Michael Francis . It would be wrong to just go out and say. It's Carla Casella from JPMorgan. Our credit card percentage is really low compared to the industry. that's not the only way to build a credit card base. Ron Johnson .JPMorgan . Deborah Weinswig .CEO Yes. We don't want to buy loyalty.JCPenney . well. Right? But there are a lot of ways to create use of credit cards. And it will be informed by how and the rate at which the customer buys because ultimately that's how you've got to run a business. JCP . Ron Johnson .Citigroup .You've got to learn from everything that you do.JCPenney . At Mervyns it was 60%. Just because things work the way they do today.President This is the last one. but obviously Town Square will be very integrated with our credit card and a loyalty program because we want to earn loyalty. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. And I can't get into it now. It's not the only way to build loyalty.Analyst My question is about brands.JCPenney . It won't be overnight. everything will improve as we market brand.CEO Yes. Well. Right? And so we do think there's an opportunity over time to slightly reduce the private brand to replace that with more global brands. . is prohibited without the prior written consent of Thomson Reuters. thanks so much and best of luck.streetevents.JANUARY 26. Republication or redistribution of Thomson Reuters content. We don't have a target. It's an extraordinary opportunity.jcpenney Analyst Meeting Day 2 Ron Johnson . You talked about yesterday the importance of having brands in your shops to bring her into the store.Analyst Hi. 27 THOMSON REUTERS STREETEVENTS | www. 50% is private. It's really important when people use that credit card because it's an indicator of a great relationship. 2012 / 2:00PM. At Kohl's it's 50%. And I would assume it's a fine balance as you talk with your vendors on which brands you'll have in the store given that you will pricing them lower than they may be at other retailers.JPMorgan .JCPenney .CEO Well. Carla Casella .CEO Thanks (inaudible). So you'll see a shift in that direction. Carla Casella . All rights reserved.com | Contact Us ©2012 Thomson Reuters. including by framing or similar means. We want to go to 25% or 30%. And we've got some other ideas that we're going to roll out as we go forward that we think are going to be pretty interesting. Everything's going to improve as we merchandise better.Analyst Great. with lots of little penny here. a discount there.JCPenney .
All rights reserved. which are more specifically identified in the companies' most recent SEC filings. Republication or redistribution of Thomson Reuters content. there can be no assurance that the results contemplated in the forward-looking statements will be realized. content. therefore. ©2012. is prohibited without the prior written consent of Thomson Reuters. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks.JANUARY 26. JCP . IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT.com | Contact Us ©2012 Thomson Reuters.JCPenney . Thomson Reuters. so we are going to cut it off. . We asked a lot of your time over the last two days. companies may make projections or other forward-looking statements regarding a variety of items.streetevents. including by framing or similar means. And right now we want all people who want to do shops to come talk to us and we'll evaluate the alternatives.JCPenney . 2012 / 2:00PM.Thank you. All right? So unfortunately -- Michael Francis . You have time. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable. In the conference calls upon which Event Transcripts are based. OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.jcpenney Analyst Meeting Day 2 While directionally it will be to more global brands. OMISSIONS. 4703737-2012-01-27T15:56:02. there's not a specific number that we've targeted in any way. So let me close by just saying thank you. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. or other information on this web site without obligation to notify any person of such changes. and we'll update you on the transformation the next time we see you.President We're running 17 over. shape or form. DISCLAIMER Thomson Reuters reserves the right to make changes to documents. Keep your fingers crossed. All Rights Reserved. Ron Johnson . THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION.527 28 THOMSON REUTERS STREETEVENTS | www. and I know two people have to leave for an engagement elsewhere. We're 17 minutes over right now.CEO Yes. THERE MAY BE MATERIAL ERRORS. but we'll see you in about three months. any of the assumptions could prove inaccurate or incorrect and.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.