Sozzi: How J.C. Penney Has Used Stealth Science to Sidestep Death

NEW YORK (TheStreet) -- Not all analysis done on a retailer from inside a store is in the pursuit of spotting mistakes by executives and merchants. Sure, the dreadful state of Sears (SHLD) could easily be brought to life by a walkthrough of ANY Sears or Kmart location, especially in Canada. At that particular chain, there are ZERO positives to record. But, many retailers actually are doing things correctly from merchandising (which includes lighting, fixtures, and folding), to customer service, to getting consumers to open their wallets.

J.C. Penney (JCP), believe it or not, currently falls under the heading of a retailer doing more right than wrong in its stores, partially explaining the recovery in the stock price from the 52-week low hit on Feb. 5, 2014. What, you thought Macy's (M) and Nordstrom (JWN) were the only department stores that excite people enough to buy items they don't really need?

>>Read More: The Shocking Truth on Why Macy's Won't Be Going Under Anytime Soon

Here is the science J.C. Penney is using in its stores to temporarily diminish the threat of bankruptcy by reconnecting with customers (and perhaps gaining new customers), positioning the chain for a new CEO to be announced in February 2015.

On the outside, J.C. Penney still resembles the Babyboomer Mom Store of America. But, on the inside, J.C. Penney has taken the fixtures it's still paying for from the era of former CEO Ron Johnson and has done this...


A big problem in 2013 was the confusing merchandise tags at J.C. Penney. The merchandise was tagged with in some cases three stickers: the original sticker from the Ron Johnson era at an everyday low price, the initial promotion enacted by the return of Mike Ullman, and another markdown to clear the product to raise badly needed cash into the holiday season. Now a sense of consistency and trust has returned to the sales floor. Believe it or not, this starts with merchandise tagging that allows for easy calculation of the item's total cost, including a 'percentage off' promotion.


Speaking of promotions, the traditional mom and granny sections located on the stores' entries are littered with eye-catching signs indicating a "deal" could be had on the day. Trust in the brand is being restored as soon as the store is approached.


The old school Ron Johnson shops now have promoted, stylish products for women and are in stock. Noticeable difference from the Johnson era, where inventory was sparse and promotions didn't creep up consistently until the end of his tenure. Lookout Kohl's (KSS), which doesn't really have promoted, visually appealing shops in its stores.


J.C. Penney isn't exactly lighting it up in terms of home department sales based on my research. However, all of the departments are now organized by category instead of lifestyle. They are easier to shop. The merchandise is being promoted. So, in about 500 J.C. Penney stores there are points of differentiation in home relative to Kohl's, Target (TGT), and even Macy's. Amazing how a Johnson era initiative appears to be helping...when done correctly by real department store industry merchants.


J.C. Penney has quietly gotten quite strong in name brand athleticwear for men and women. The company's presentation in Nike (NKE), Adidas, etc. is not seen at Kohl's (small section dedicated to Fila and private label) or Target (TGT) (very disappointing selection in terms of brands and selection).


A pleasant surprise is J.C. Penney's female teen apparel section, which has a certain Forever 21 feel to it from a price and fashion perspective. Memo to Abercrombie & Fitch (ANF) execs, head to J.C. Penney for a quick lesson on what you should be flowing into your cologne-ridden locations.


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-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

At the time of publication, Sozzi held no position in the stocks mentioned.

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