J.C. Penney's CEO-Designee Marvin Ellison, who assumes the position from long-time retail executive Mike Ullman on August 1, is rounding into form behind the scenes. "He has been driving the plans the last few months," said Ullman during a presentation at Piper Jaffray on Wednesday.
Ellison, who had a well-regarded 12-year career at home improvement retailer Home Depot ( HD) before joining J.C. Penney in October, has his work cut out for him in trying to deliver on some lofty sales and profit targets set by Ullman.
Last October, J.C. Penney projected it would add about $2 billion in sales and $1.2 billion in earnings before interest, taxes and depreciation (EBITDA) by the end of 2017 by jazzing up its product line-up and getting back to retail basics.
Ellison appears to be up for the challenge of helping revive the 113-year old retailer. "The culture means something to me -- this was an opportunity too good to pass up," said Ellison on why he jumped ship to a department store retailer that during 2013, and most of 2014, was still correcting serious operational mistakes from its former CEO Ron Johnson and racking up big losses.
Ellison outlined three areas that he will be focusing on at J.C. Penney in the months to come.
1. Improve store layouts for better sales.
For J.C. Penney, as in most department stores, the center of the store is filled with ladies handbags, jewelry and men's and women's shoes. And at J.C. Penney, specifically the center at hundreds of its stores, also includes its hot Sephora cosmetics business. Ellison earmarked these departments as ripe for better execution.
The goal is to get people to walk into the center of the store, and as they walk out, interest them in buying other items. The center of the store is "essential for (driving sales amongst) female customers," noted Ellison.
2. Integrate the digital business with the company's 1,000-plus brick-and-mortar stores.
"We are behind in strategy," acknowledged Ellison on the topic of "ominichannel retailing," or the process of making it seamless for people to buy and receive merchandise whether they are on a mobile device or in a physical store. Macy's (M) has been seen as a pioneer on the omnichanneling retailing front, but J.C. Penney has work to do.
J.C. Penney continues to roll out its program where customers can buy online and have merchandise shipped from stores. And it's exploring same-day delivery services, which it is believed to be launching in 2016.
In its favor as it tries be more digitally relevant to customers is J.C. Penney's long history in catalog retailing, pointed out Ellison. That business has given J.C. Penney the physical infrastructure to introduce new initiatives such as shipping goods from a store to fulfill an online order, while investing less than some on Wall Street would expect to tighten up the network's capabilities.
3. Revive sales in the home department.
The J.C. Penney home department was about 12% of the retailer's total business in 2014, but it was once over 20% of the business. The home business was hurt by former CEO Ron Johnson, who built shops within the stores. These shops destroyed sight lines and offered products that were too expensive. Allowing customers to see from one end of a store to the other is vital in tempting consumers to other parts of a store.
Additionally, the wide aisles between the new shops took away valuable real estate to sell items. "We have made progress, but are not fully back," admitted Ellison.
J.C. Penney may opt to knock down the shops in some stores to get back to the traditional way of selling home goods, which for years worked quite well. Recently, the company began reconfiguring the merchandise for sale in the shops erected by Johnson, introducing more affordable items from brands like furniture maker Bassett and gift purveyor Hallmark.