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Penny in the midst of a one billion dollar reinvestment plan to enhance the customer experience. Here with us now, I am pleased to say we have Mark Rosen. He is the CEO of JC Penny. So you announced that one billion dollar reinvestment strategy last August. We almost a year in. So what has been accomplished, but more importantly, what is left still to do?
Yeah, good morning, and thank you for having me. So we announced, as you said, about a year ago, a billion dollar self funded reinvestment in the business as we reinvigorate JC penny. And what you've seen is, first of all, shopping experience. So the shopping experience is obviously incredibly important to us and to our customer And as far as shopping experience goes, we've invested a lot in remodeling our stores.
So by the end of this year, we'll have almost a third.
Of our store fleet will be remodeled, and customers will find a new shopping experience when they come into those stores. They're also going to find a new shopping experience online, easier search, easier to find the product they're looking for, and more fashion inspirations. So shopping experience is a big
part of the investment. Supply chain and technology is another big part of the investment, and we've invested a lot in new technology for our merchants and for our inventory planners to make sure that we have the right things
in the right place for the customer. And then we just rolled out in our Reno distribution center a new sorting system and a new system that will allow the distribution center to pick orders more efficiently and to make sure that we're more accurately getting those orders to the customer.
So supply chain and technology is another key part of it, and a third part is really around the brand, And in conjunction with that announcement, last fall, we rolled out our new brand platform, make Account, which is all about making sure that the customer understands that they're going to find accessible fashion, a rewarding shopping eperience at jcpenny, and that we stand by them and their communities. And if
we talk about rewarding shopping experience. In April, we rolled out a new rewards program for our customers, and we've seen sign ups increase significantly since we rolled out that program, right and we've also seen customers earn more points and coming back to shop and redeeming those points, which is really driving shopping frequency as we go into the back to school season.
Well, Mark, there's a lot to dig into there, but I do want to talk a little bit more about how people are shopping. Of course, shoppers increasingly moving online, but when it comes to your physical footprint, it was interesting you actually heard in May Simon Property Group CEO David Simon say that jcpenny could benefit from opening more
physical stores. I know that you recently opened a new location in New Jersey, but when you look to the future and this reinvestment plan, does that include more brick and mortar stores.
Right So, we have about six hundred and sixty stores right now, and stores are a really important part of our shopping experience. If you look at how the customer shops, about a third of our shopping is online right now and about two thirds is in stores. But really that makes it sound much too much, too pure. In other words, the customers starting out online, they're looking and finding the items, they're doing research, and then they're coming into stores. Stores
are a really important part of that shopping experience. It's a social experience, Customers want to try product on. And so, as you mentioned, this spring, we opened a brand new store in Wayne, New Jersey, and we're really excited about that store. It's an all open shopping environment and it really allows us to showcase the products and the brands and give the consumer a great shopping experience. And so that's really important as we move forward through the transformation.
I note you took over only a couple of years ago, Mark, but I'm sure the President Biden is going to be asking voters, you know, if they're better off now than they were four years ago, what about your customers? How are they faring right now?
Your consumers right So it's interesting as we think about our customer and our customer or really is the core of America Our customers, America's diverse working families, and our customer is the school teacher who's teaching our children. It is the medical worker who is taking care of us and our families. And it's the construction workers who are building the homes and the offices that we live in. And so for our customer, inflation has been very, very difficult.
And what I say is that our customers often the first to suffer as inflation hits, and they're the last to recover as that happens. In other words, inflation hits and those mortgage prices, those rent prices go up, and those prices stay up. They're sticky, they don't come down right away, and that impacts our customers in a big way. And it's another reason that value is really really important to our customers.
So what we're focused.
Right now as we go into back to school and as the customer shopping for back to school, is making sure that we're bringing them incredible value so that they can get what they need for their family in these moments.
Yeah, if you look at the JZ Penny website right now, you do have a lot of deals out there. Wondering if you take a look to your point, middle to low end consumers across corporate America have shown lots of signs of weakness. How much more do you have to mark items down now to bring in that consumer.
Well, I think what's really important to them is showing them that they can find the fashion that they want. Fashion is really important to our consumer, but they can also find it at a great price. So you're right, if you look at our site right now, and if you go into our stores right now, we're in black Friday and July. Back to school is really important. That's top of mind for our customer right now. If they're shopping for a college student moving into the dorm, they're
going to find bath towels for two ninety nine. And if they're shopping for their kids going back to school, they're going to find t shirts for four ninety nine. So we have about seven thousand items under twenty dollars for the whole family, and over fifteen hundred items that are under ten dollars, and that's in kids apparel, So that value is really really important. I think one of the things that we have at jcpenny is the power
of our private label brands. And we have great brands that we design and source and produce, and we can bring them to the customer to great value in a great savings And.
I'm also curious about your long game here, Mark, there was a time where JC penny was under very severe distress and really you're leading a turnaround story here. What does JC penny look like three five years from now?
Financially right we're really focused. I'm sorry I missed the last pot so financially.
Financially okay, So we're really focused on the customer and that customer experience and bringing the customer a great shopping experience, and we know at the end of the day that's what's going to drive great financial results.
If you look at the business.
Right now, we have one of the cleanest balance sheets in the entire industry, and that's very important. So we have under half a billion dollars of debt on the balance sheet right now, so a very clean balance sheet, over one point six billion dollars of liquidity, and the business is generating strong cash flow.
And it's that cash flow when you go back.
To the investment and the over a billion dollar investment back in the business. That cash flow is what we're using to invest back into the business. When I look to the future, what I see is this is going to be a business that has a mix of stores as a mix of online is generating a healthy cash flow because we're delivering what the customer needs, which right now is great product, accessible fashion at a great value, and a really rewarding shopping experience.
Well Mark, just.
To follow up on that point again, you look far in the future, five years down the line, and I hear what you say on there being a lot of milestones to hit, but could we see JC Penny go public again?
So right now, as you mentioned, we're private right now, and that does give us the advantage of being able to invest in this transformation. And that's really important right now is to be able to take that cash invested in the transformation to really focus on the customer. And right now we're we're in what I would say is the middle of that transformation. We've did a lot in
the shopping experience. I said about a third of our stores will be remodeled by the end of this year, but there's still a lot more to do in terms of stores, in the online experience and the shopping experience, and we're in the process of reinvigorating our brand.
So that's what's important to us now.
We're continuing to drive that cash flow, continuing to reinvest in the experience for the customer, and we'll see what the future brings.
I wonder about keeping your employees engage. You know, I spend, for whatever reason, a lot of time in big box stores here in Westchester, and oftentimes employees are on break don't really care you know, messing around with products instead of customers. How do you keep them engaged? And how much more have you had to pay them over the last say, you know.
Three years?
Right, So for our customers, I think I joined the company about two and a half years ago.
And when I did, we really united around.
Our purpose, which is to serve and celebrate with America's diverse working families. And the interesting I think the really great thing for us is our employees are also America's diverse working families, and they see what we're doing for their communities and what we're doing for them, and they are engaged in the purpose of the company, in the culture of the company, and in bringing back and driving.
Those results that I talked about.
So that's what's really important in terms of keeping our associates engaged. We've actually over the last couple of years seen a big increase in our net Promoter score, which is how we manage how we measure customer satisfaction when
customers are in our stores. And so we're really pleased with the way that our customers are staying close to the customer, engage with the customer, and making sure they have a great experience in store and part of the investment is also in technology like new point of sale technology and mobile point of sale to make sure that that customer does have a better experience every time they come into the store.
Mark you place clearly a lot of importance on inclusion and diversity. You celebrate diversity events. Is that harder in today's climate? We just saw deer you have to back down. We're talking about tractor supply. You're in Dallas, Texas. Is it harder for you?
What I would say is again, our customer is America's diverse working families, and our customer is a broad set that really reflects America. That is the same of our employee base. And we are really focused on respect and inclusion for all of our customer base and our employee base, and it is important to everything that we do.
Mark, We thank you so much for joining us today. Best of luck to you. That is the CEO of JC Penny in the middle of a big turnaround.