Penney CEO Expects No Turnaround Until Mid-2003

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J.C. Penney saw catalog sales fall a whopping 21.4 percent for the second quarter. To make matters worse, positive numbers aren't expected until "probably mid-2003," said Vanessa Castagna, chairwoman/CEO of JCPenney Stores, Catalog and Internet.

Roz Bryant, stock analyst at research firm Morningstar, Chicago, said the company clearly lacks a "strategic direction for the catalog as evidenced by a number of that magnitude."

In the 13 weeks ended July 27, retail sales in J.C. Penney's stores and catalog were $3.62 billion, down from $3.86 billion a year ago. In the 26 weeks ended July 27, retail sales in the two divisions totaled $7.63 billion, down from $7.92 billion a year ago.

"J.C. Penney took its eye off the ball for years and lost a lot of customers and respect," Bryant said. "Now they are trying to regain it, and that is always a tough proposition -- especially when Kohl's, Wal-Mart and Target are after your customers."

Castagna characterized the decline as being "below original expectations," with catalog sales being affected by "generally soft demand."

However, Internet sales produced increases of more than 30 percent.

"Catalog sales have also been impacted by program and policy changes we've made, such as shipping, handling and payment collections," she said. "While we have not achieved our sales plan, we continue to work on enhancements to the catalog merchandise mix and presentation in our books."

The company also has started a strong activation program for existing customers who have not made recent purchases and initiated programs to acquire new customers, Castagna said.

"While sales have been disappointing ... catalog is becoming a more profitable business," she said. "We've pulled back too far on some clearance media that we had, and we're going to be adding some of those back in because those are acquisition for the customer file. In the meantime, we're really focused on expense reductions and inventory productivity in the catalog and direct business."

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