Marc Rosen, CEO of JCPenney, sees a lot of evidence that working-class families are struggling.
Customers are increasingly relying on credit cards, falling behind on bills, and gravitating toward private label brands like Liz Claiborne rather than more expensive national names, according to Rosen.
“Our customers are working families in America.” They are the instructors who teach our children in schools, the construction workers who build our homes, and the medical personnel who care for us,” Rosen explained in an interview last week. “And that customer is facing a tougher economic environment.”
The CEO of JCPenney emphasized the snowball effect that inflation has had on family finances, saying that the average household is spending approximately $700 more per month for the same goods and services than they were two years ago.
“That’s tough for a family like that because it means they’re making tradeoffs in everything they can do,” Rosen explained.
Rosen sees indications of this financial stress in the department store’s “very strong” expansion of private brands, which are priced lower than national names. He cited strong private-label sales of garments as well as home products such as kitchenware and small appliances such as blenders and toasters.
Similarly, Rosen stated that, while JCPenney maintains a “strong” portfolio of company-branded credit cards for its clients, credit consumption has climbed and the rate of delinquencies has returned to pre-Covid-19 levels.
This is consistent with what other stores have indicated. Macy’s has issued a warning about rising credit card delinquencies, and the New York Federal Reserve discovered that the rate of new credit card delinquencies had risen above mid-2019 levels.
JCPenney’s statements highlight the perplexing status of the US economy. Even though the likelihood of a recession has decreased and the labor market remains strong, some consumers are suffering.
Dollar General has reduced its sales and profit forecast for the year, citing core customers who are “financially constrained.” Bank of America has discovered that Americans are withdrawing funds from their 401(k) accounts owing to financial difficulties.
Nonetheless, JCPenney claims that these economic concerns play to the company’s strengths.
“I absolutely believe that this is a take-share moment right now,” Rosen declared. “We believe that customers deserve a shopping experience in which they do not have to make those tradeoffs, in which they can still get that great fashion without having to pay a price that makes it difficult to put groceries on the table.”
That is why JCPenney is investing $1 billion in upgrading the old retailer. The self-funded reinvestment program includes everything from new merchandising tools to speed up its supply chain to store renovations such as new technology, fitting rooms, and even a fresh coat of paint.
The $1 billion reinvestment is a watershed moment for a renowned corporation that declared bankruptcy in May 2020. JCPenney was able to emerge from bankruptcy later that year thanks to a rescue from mall owners Simon Property Group and Brookfield Asset Management.
“We’re in a really strong financial position right now, with a clean balance sheet and strong cash flow funding the operations of the business,” Rosen said, adding that no big store closures are planned.
The CEO of JCPenney refused to say whether the department retailer intends to return to the public markets via an initial public offering. However, he indicated that an IPO is not in the near future.
“We think there are a lot of advantages right now to being a private company,” Rosen said, adding that JCPenney’s owners are reinvesting in the firm and have a “long-term perspective” on that investment.
