JC Penney Co Inc JCP
Q2 2012 Earnings Call Transcript

Transcript Call Date 08/10/2012

Now the technology is fun and then going forward this is a pretty amazing thing. We will be spending starting fiscal year 2013, 35% of the money we spend on new forward-looking technology. That’s over a $100 million a year, each and every year focused on new initiatives. So we not only want to be good, we want to stay ahead on the technology front. The technology is a key to the store design, because if you don’t change your technology, you can’t reinvent the experience for the customer, and so we’ve made the technology decisions hand-in-hand with our vision for the store design.

As you know today or last year Penney’s was a promotional department store. There are couple of them; Kohl's and Penney’s, Mervyn's was one. Most of them have gone away. We believe the promotional model is outdated. We think there is a better way. So what are we going to become? We’re going to become entirely new class of department store that doesn't exist today. Now today there are discount department stores like target and Walmart, promotional like Penney’s and Kohl’s, there’s a traditional department store like Macy's which kind of plays in between the promotional model and a traditional department store model, and then you’ve got upscale department stores like Neiman Marcus and Nordstrom and Saks and Bergdorf and you know them. We’re going to create a new category that we call the specialty department store, and we think it’s going to be profound, and let me tell you about it. It’s got three components and we’re going to talk really about the store design, (and add) about the service initiatives. There is a major focus on people, we’re going to focus on the store design. There are shops, there are street, and a square, and let's start with the shops.

This is a layout of our new store prototype. We will open our first new store in fall 2013, so little over a year from now. We’ve already got the site picked out. We’re working closely with a developer, we've designed that store. It's about 130,000 square feet. If you look at this map, what you'll notice is this grey area is where the shops are, and you'll see it's divided and if you look here, the majority of the stores are shops. Everything I guess blue here is a shop and if you look really closely, you will see the dividers. So, we don't have a sea of racks like you see in a department store today even like in our store, everything is organized by shops just like mall is, alright.

Now, when we're done that store will have a 100 unique shops and there will be single-brand shops, there will be classification shops, but it will feel like just when you walk through the shopping mall, there are variety of things from which to buy. They will be organized in a way that's very straightforward. We'll have men's areas, women's areas, kid's areas and home, kind of the traditional categories that people come.

The shops will be of varying sizes. There will be as small as 500 square feet and as large as 1,400 square feet or more. Now remember when you compare this to a mall, though, there is no – we're not counting the stockroom space and the storefront space. So, 1,400 square feet inside a store like ours is much bigger than a retailer we get in the mall where a full 25% of the space is devoted to their inventory space, etc. These are pretty big spaces, and we will have shops for soft lines, traditional apparel. We have shops for hard lines. Some of those will be similar to what we carry today in home, but in our new environment there are no limits to the type of products we can carry, and you will see that when you look at the images, because when you go shop to shop, it feels very natural to move into a different type of category that we’ve never been in before. (And it is really) exploring new and exciting categories in our stores from what we carry today, which will provide incremental volume and (we've done on pretty limited) products.

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