WEBVTT - JCPenny CEO Marc Rosen

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, JC.

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<v Speaker 2>Penny in the midst of a one billion dollar reinvestment

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<v Speaker 2>plan to enhance the customer experience. Here with us now,

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<v Speaker 2>I am pleased to say we have Mark Rosen. He

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<v Speaker 2>is the CEO of JC Penny. So you announced that

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<v Speaker 2>one billion dollar reinvestment strategy last August. We almost a

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<v Speaker 2>year in. So what has been accomplished, but more importantly,

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<v Speaker 2>what is left still to do?

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<v Speaker 3>Yeah, good morning, and thank you for having me. So

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<v Speaker 3>we announced, as you said, about a year ago, a

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<v Speaker 3>billion dollar self funded reinvestment in the business as we

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<v Speaker 3>reinvigorate JC penny. And what you've seen is, first of all,

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<v Speaker 3>shopping experience. So the shopping experience is obviously incredibly important

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<v Speaker 3>to us and to our customer And as far as

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<v Speaker 3>shopping experience goes, we've invested a lot in remodeling our stores.

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<v Speaker 1>So by the end of this year, we'll have almost

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<v Speaker 1>a third.

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<v Speaker 3>Of our store fleet will be remodeled, and customers will

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<v Speaker 3>find a new shopping experience when they come into those stores.

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<v Speaker 3>They're also going to find a new shopping experience online,

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<v Speaker 3>easier search, easier to find the product they're looking for,

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<v Speaker 3>and more fashion inspirations. So shopping experience is a big

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<v Speaker 3>part of the investment. Supply chain and technology is another

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<v Speaker 3>big part of the investment, and we've invested a lot

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<v Speaker 3>in new technology for our merchants and for our inventory

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<v Speaker 3>planners to make sure that we have the right things

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<v Speaker 3>in the right place for the customer. And then we

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<v Speaker 3>just rolled out in our Reno distribution center a new

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<v Speaker 3>sorting system and a new system that will allow the

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<v Speaker 3>distribution center to pick orders more efficiently and to make

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<v Speaker 3>sure that we're more accurately getting those orders to the customer.

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<v Speaker 3>So supply chain and technology is another key part of it,

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<v Speaker 3>and a third part is really around the brand, And

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<v Speaker 3>in conjunction with that announcement, last fall, we rolled out

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<v Speaker 3>our new brand platform, make Account, which is all about

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<v Speaker 3>making sure that the customer understands that they're going to

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<v Speaker 3>find accessible fashion, a rewarding shopping eperience at jcpenny, and

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<v Speaker 3>that we stand by them and their communities. And if

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<v Speaker 3>we talk about rewarding shopping experience. In April, we rolled

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<v Speaker 3>out a new rewards program for our customers, and we've

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<v Speaker 3>seen sign ups increase significantly since we rolled out that program,

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<v Speaker 3>right and we've also seen customers earn more points and

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<v Speaker 3>coming back to shop and redeeming those points, which is

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<v Speaker 3>really driving shopping frequency as we go into the back

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<v Speaker 3>to school season.

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<v Speaker 2>Well, Mark, there's a lot to dig into there, but

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<v Speaker 2>I do want to talk a little bit more about

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<v Speaker 2>how people are shopping. Of course, shoppers increasingly moving online,

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<v Speaker 2>but when it comes to your physical footprint, it was

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<v Speaker 2>interesting you actually heard in May Simon Property Group CEO

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<v Speaker 2>David Simon say that jcpenny could benefit from opening more

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<v Speaker 2>physical stores. I know that you recently opened a new

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<v Speaker 2>location in New Jersey, but when you look to the

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<v Speaker 2>future and this reinvestment plan, does that include more brick

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<v Speaker 2>and mortar stores.

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<v Speaker 3>Right So, we have about six hundred and sixty stores

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<v Speaker 3>right now, and stores are a really important part of

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<v Speaker 3>our shopping experience. If you look at how the customer shops,

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<v Speaker 3>about a third of our shopping is online right now

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<v Speaker 3>and about two thirds is in stores. But really that

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<v Speaker 3>makes it sound much too much, too pure. In other words,

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<v Speaker 3>the customers starting out online, they're looking and finding the items,

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<v Speaker 3>they're doing research, and then they're coming into stores. Stores

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<v Speaker 3>are a really important part of that shopping experience. It's

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<v Speaker 3>a social experience, Customers want to try product on. And so,

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<v Speaker 3>as you mentioned, this spring, we opened a brand new

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<v Speaker 3>store in Wayne, New Jersey, and we're really excited about

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<v Speaker 3>that store. It's an all open shopping environment and it

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<v Speaker 3>really allows us to showcase the products and the brands

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<v Speaker 3>and give the consumer a great shopping experience. And so

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<v Speaker 3>that's really important as we move forward through the transformation.

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<v Speaker 4>I note you took over only a couple of years ago, Mark,

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<v Speaker 4>but I'm sure the President Biden is going to be

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<v Speaker 4>asking voters, you know, if they're better off now than

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<v Speaker 4>they were four years ago, what about your customers? How

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<v Speaker 4>are they faring right now?

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<v Speaker 3>Your consumers right So it's interesting as we think about

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<v Speaker 3>our customer and our customer or really is the core

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<v Speaker 3>of America Our customers, America's diverse working families, and our

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<v Speaker 3>customer is the school teacher who's teaching our children. It

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<v Speaker 3>is the medical worker who is taking care of us

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<v Speaker 3>and our families. And it's the construction workers who are

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<v Speaker 3>building the homes and the offices that we live in.

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<v Speaker 3>And so for our customer, inflation has been very, very difficult.

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<v Speaker 3>And what I say is that our customers often the

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<v Speaker 3>first to suffer as inflation hits, and they're the last

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<v Speaker 3>to recover as that happens. In other words, inflation hits

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<v Speaker 3>and those mortgage prices, those rent prices go up, and

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<v Speaker 3>those prices stay up. They're sticky, they don't come down

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<v Speaker 3>right away, and that impacts our customers in a big way.

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<v Speaker 3>And it's another reason that value is really really important

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<v Speaker 3>to our customers.

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<v Speaker 1>So what we're focused.

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<v Speaker 3>Right now as we go into back to school and

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<v Speaker 3>as the customer shopping for back to school, is making

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<v Speaker 3>sure that we're bringing them incredible value so that they

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<v Speaker 3>can get what they need for their family in these moments.

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<v Speaker 5>Yeah, if you look at the JZ Penny website right now,

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<v Speaker 5>you do have a lot of deals out there. Wondering

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<v Speaker 5>if you take a look to your point, middle to

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<v Speaker 5>low end consumers across corporate America have shown lots of

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<v Speaker 5>signs of weakness. How much more do you have to

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<v Speaker 5>mark items down now to bring in that consumer.

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<v Speaker 3>Well, I think what's really important to them is showing

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<v Speaker 3>them that they can find the fashion that they want.

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<v Speaker 3>Fashion is really important to our consumer, but they can

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<v Speaker 3>also find it at a great price. So you're right,

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<v Speaker 3>if you look at our site right now, and if

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<v Speaker 3>you go into our stores right now, we're in black

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<v Speaker 3>Friday and July. Back to school is really important. That's

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<v Speaker 3>top of mind for our customer right now. If they're

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<v Speaker 3>shopping for a college student moving into the dorm, they're

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<v Speaker 3>going to find bath towels for two ninety nine. And

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<v Speaker 3>if they're shopping for their kids going back to school,

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<v Speaker 3>they're going to find t shirts for four ninety nine.

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<v Speaker 3>So we have about seven thousand items under twenty dollars

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<v Speaker 3>for the whole family, and over fifteen hundred items that

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<v Speaker 3>are under ten dollars, and that's in kids apparel, So

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<v Speaker 3>that value is really really important. I think one of

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<v Speaker 3>the things that we have at jcpenny is the power

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<v Speaker 3>of our private label brands. And we have great brands

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<v Speaker 3>that we design and source and produce, and we can

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<v Speaker 3>bring them to the customer to great value in a

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<v Speaker 3>great savings And.

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<v Speaker 5>I'm also curious about your long game here, Mark, there

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<v Speaker 5>was a time where JC penny was under very severe

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<v Speaker 5>distress and really you're leading a turnaround story here. What

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<v Speaker 5>does JC penny look like three five years from now?

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<v Speaker 1>Financially right we're really focused. I'm sorry I missed the last

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<v Speaker 1>pot so financially.

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<v Speaker 3>Financially okay, So we're really focused on the customer and

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<v Speaker 3>that customer experience and bringing the customer a great shopping experience,

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<v Speaker 3>and we know at the end of the day that's

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<v Speaker 3>what's going to drive great financial results.

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<v Speaker 1>If you look at the business.

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<v Speaker 3>Right now, we have one of the cleanest balance sheets

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<v Speaker 3>in the entire industry, and that's very important. So we

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<v Speaker 3>have under half a billion dollars of debt on the

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<v Speaker 3>balance sheet right now, so a very clean balance sheet,

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<v Speaker 3>over one point six billion dollars of liquidity, and the

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<v Speaker 3>business is generating strong cash flow.

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<v Speaker 1>And it's that cash flow when you go back.

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<v Speaker 3>To the investment and the over a billion dollar investment

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<v Speaker 3>back in the business. That cash flow is what we're

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<v Speaker 3>using to invest back into the business. When I look

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<v Speaker 3>to the future, what I see is this is going

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<v Speaker 3>to be a business that has a mix of stores

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<v Speaker 3>as a mix of online is generating a healthy cash

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<v Speaker 3>flow because we're delivering what the customer needs, which right

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<v Speaker 3>now is great product, accessible fashion at a great value,

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<v Speaker 3>and a really rewarding shopping experience.

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<v Speaker 1>Well Mark, just.

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<v Speaker 2>To follow up on that point again, you look far

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<v Speaker 2>in the future, five years down the line, and I

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<v Speaker 2>hear what you say on there being a lot of

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<v Speaker 2>milestones to hit, but could we see JC Penny go

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<v Speaker 2>public again?

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<v Speaker 3>So right now, as you mentioned, we're private right now,

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<v Speaker 3>and that does give us the advantage of being able

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<v Speaker 3>to invest in this transformation. And that's really important right

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<v Speaker 3>now is to be able to take that cash invested

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<v Speaker 3>in the transformation to really focus on the customer. And

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<v Speaker 3>right now we're we're in what I would say is

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<v Speaker 3>the middle of that transformation. We've did a lot in

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<v Speaker 3>the shopping experience. I said about a third of our

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<v Speaker 3>stores will be remodeled by the end of this year,

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<v Speaker 3>but there's still a lot more to do in terms

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<v Speaker 3>of stores, in the online experience and the shopping experience,

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<v Speaker 3>and we're in the process of reinvigorating our brand.

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<v Speaker 1>So that's what's important to us now.

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<v Speaker 3>We're continuing to drive that cash flow, continuing to reinvest

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<v Speaker 3>in the experience for the customer, and we'll see what

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<v Speaker 3>the future brings.

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<v Speaker 4>I wonder about keeping your employees engage. You know, I spend,

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<v Speaker 4>for whatever reason, a lot of time in big box

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<v Speaker 4>stores here in Westchester, and oftentimes employees are on break

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<v Speaker 4>don't really care you know, messing around with products instead

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<v Speaker 4>of customers. How do you keep them engaged? And how

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<v Speaker 4>much more have you had to pay them over the

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<v Speaker 4>last say, you know.

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<v Speaker 1>Three years?

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<v Speaker 3>Right, So for our customers, I think I joined the

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<v Speaker 3>company about two and a half years ago.

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<v Speaker 1>And when I did, we really united around.

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<v Speaker 3>Our purpose, which is to serve and celebrate with America's

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<v Speaker 3>diverse working families. And the interesting I think the really

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<v Speaker 3>great thing for us is our employees are also America's

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<v Speaker 3>diverse working families, and they see what we're doing for

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<v Speaker 3>their communities and what we're doing for them, and they

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<v Speaker 3>are engaged in the purpose of the company, in the

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<v Speaker 3>culture of the company, and in bringing back and driving.

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<v Speaker 1>Those results that I talked about.

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<v Speaker 3>So that's what's really important in terms of keeping our

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<v Speaker 3>associates engaged. We've actually over the last couple of years

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<v Speaker 3>seen a big increase in our net Promoter score, which

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<v Speaker 3>is how we manage how we measure customer satisfaction when

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<v Speaker 3>customers are in our stores. And so we're really pleased

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<v Speaker 3>with the way that our customers are staying close to

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<v Speaker 3>the customer, engage with the customer, and making sure they

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<v Speaker 3>have a great experience in store and part of the

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<v Speaker 3>investment is also in technology like new point of sale

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<v Speaker 3>technology and mobile point of sale to make sure that

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<v Speaker 3>that customer does have a better experience every time they

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<v Speaker 3>come into the store.

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<v Speaker 4>Mark you place clearly a lot of importance on inclusion

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<v Speaker 4>and diversity. You celebrate diversity events. Is that harder in

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<v Speaker 4>today's climate? We just saw deer you have to back down.

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<v Speaker 4>We're talking about tractor supply. You're in Dallas, Texas. Is

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<v Speaker 4>it harder for you?

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<v Speaker 3>What I would say is again, our customer is America's

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<v Speaker 3>diverse working families, and our customer is a broad set

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<v Speaker 3>that really reflects America. That is the same of our

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<v Speaker 3>employee base. And we are really focused on respect and

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<v Speaker 3>inclusion for all of our customer base and our employee base,

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<v Speaker 3>and it is important to everything that we do.

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<v Speaker 5>Mark, We thank you so much for joining us today.

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<v Speaker 5>Best of luck to you. That is the CEO of

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<v Speaker 5>JC Penny in the middle of a big turnaround.