Tags: Ackman | Penney | Johnson | stores

Ackman: JC Penney’s ‘Store Within a Store’ Concept Is a Winner

Wednesday, 14 Nov 2012 03:34 PM

By Peter Moses

Despite a third-quarter loss of $123 million, at least one leading hedge fund manager believes JC Penney’s “stores within a store” concept is a winning formula that will transform the usually dowdy big box store into the Apple of the retail world and attract younger people to shop there.

Ace hedge fund manager Bill Ackman of Pershing Square Capital Management believes the retail store is going through a metamorphosis and will come out of it a healthy company with bulging profits, CNBC reported, and he credits recently installed CEO Ron Johnson with what he believes is a winning formula.

Johnson, whose previous job was running Apple’s retail operation, has partnered with edgy clothing lines like Canada’s Joe Fresh and MNG by Mango. These brands are starting to draw younger shoppers into J.C. Penney stores, according to Forbes. Other partners like a recently released holiday collections LULU by Lulu Guinness, Jenny Packham Boudoir and Double Happiness Vivienne Tam have also been well-received. Stalwarts like Levi’s, Martha Stewart and Liz Claiborne still share space with the newer brands and keep the stores’ existing customers happy.

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"The way you have to look at this is two companies," Ackman told CNBC. "One is a startup called New JCP, which started August 1 and has gone from zero to 7 million square feet in a month.”

Ackman noted that Johnson’s plan is to convert all 111 million square feet of the company’s retail space over the course of the next three to four years to stores within the store.

The company currently has just 10 shops already in place in the stores. J.C. Penney’s earlier strategy, adopting a "fair and square" pricing strategy that eliminated most sales, caused a mass exodus of shoppers and Johnson and Ackman hope the “new jcp” will draw people back into the 700-store chain, DailyFinance.com reported.

Results have been positive, Ackman said. The new space is producing $270 per square foot in sales, doubling the $135 per square foot the rest of J.C. Penney is producing. However, the numbers still pale in comparison with Wal-Mart, which averages $424, the Financial Times reported.

“You go into the new jcpenney and there will be 100 shops. A typical mall has about 100 shops. A person goes into a mall, … they go into a store, they buy a dress, they wait in line, they pay. Then they walk to the store on the other side of the mall and get to four shops,” he said.

“Here we have 100 shops in a tight geographic area. … You can go into 15, 20, 30 shops in this consolidated” space, Ackman added.

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