J.C. Penney Co. plans to increase annual sales more than one-fourth, or $5 billion, to $23 billion by 2014, driven by online sales and new products such as the upcoming Liz Claiborne exclusive collection.
Penney said same-store sales are expected to grow 5% compounded annually. Online sales are expected to increase by $1 billion to $2.5 billion. Per-share profit is projected to jump by 25% compounded annually to more than $5 a share.
As part of his growth plan, Penney is rolling out the Liz Claiborne collection of apparel, shoes and home goods this fall, which is expected to be its biggest national brand. Also, MNG by Mango boutiques from the Spanish retailer will be installed inside Penney stores, as well as increase the number of in-store Sephora cosmetics shops to 600 from about 230 this year. The company also has signed a marketing partnership with Time Warner Inc. to feature its People StyleWatch’s “must have” looks in its stores.
The company also plans to increase sales per square foot to its peak of $250 by 2014 while growing its gross margin modestly to 40% by 2014 from 39.4% last year.
Myron E. (Mike) Ullman, III, chairman and chief executive officer, said, “Its a new day at JCPenney thanks to the steps we have taken to be a style destination, to develop sophisticated technology and tools to manage our business, and to be in an exceptionally strong financial position. We are now focused on taking our transformation to the next level by introducing new initiatives in support of our vision to be Americas favorite shopping destination for great styles at compelling prices. As we do this, we intend to drive profitable sales growth, enhance our financial performance and achieve industry leadership.”
Long Range Plan and Financial Expectations for 2010-2014:
The company stated that its updated Long Range Plan goals are:
* being our Customers favorite destination for stylish apparel, accessories and home fashion, inspiring existing customers to shop more with us and accelerating growth among a younger (25-44 year old) customer base;
* consistently delighting our customers with our Merchandise and services that create a sense of discovery and excitement at each shopping visit;
* being the preferred choice for a retail career for our Associates by continuing to build a company culture that fosters innovation and teamwork;
* industry growth leadership for our Shareholders, investing resources that support sales growth and enhance shareholder value.
Based on its expectations stemming from the execution of these strategies, the Company also provided financial performance targets for the five-year period, ending in 2014.
* By the end of fiscal 2014, the Company expects total sales to increase over $5 billion to reach approximately $23 billion. This is expected to be driven primarily by comparable store sales growth.
* Gross margin is expected to increase to approximately 40 percent of sales, but total operating expenses should decline as a percent of sales, and operating income is expected to steadily increase over the period and be approximately 9 to 10 percent by 2014. This is in the range of the Companys historical peak of 9.7 percent achieved in 2006.
* After 2010, EPS growth, adjusted for the pension expense impact, is expected to achieve a 25 percent compounded annual growth rate over the following four year period to bring expected EPS for 2014 to over $5.00 per share.
* The companys cash flow is expected to increase from approximately $200 million in 2010 to $500 million in 2014.
* Capital expenditure levels are expected to increase over the period to include new store growth as the commercial real estate market and consumer economy recover. In the early years of the Plan, capital expenditures will be focused on ongoing existing store renovation and the continued rollout of the highly successful Sephora inside JCPenney concept.
* Returns on capital and financial leverage metrics are expected to be in alignment with retail industry leaders at the end of the five-year period.
