J. C. Penney (JCP) Calls It Spring

J. C. Penney Company Inc. (JCP), a leading retailer of apparel, footwear and accessories, recently entered into a deal to become the sole retailer in the United States for Aldo USA Inc.’s ‘Call It Spring’ brand, a footwear and accessory line.

An operator of 1,500 stores in more than 50 countries, Aldo’s brand carries over 300 styles of trendy footwear and accessories at prices between $29.99 and $69.99, and targets people in the age group of 15 to 30 years.

The ‘Call It Spring’ brand will be launched as an in-store department and will occupy a dedicated area of 600 square feet in the women’s section and over 400 square feet in the men’s division. The company’s in-store department concepts such as ‘Sephora’, the upcoming ‘Call It Spring’ and ‘MNG by Mango’ target younger and more affluent customers.

J. C. Penney’s Manhattan store will be the first to host the brand this fall, which would then be gradually extended to 100 stores and feature on the company’s website by the spring of 2011. By next fall in 2011, the brand will be expanded to another 500 J. C. Penney locations.

The recent deal with Aldo will not only expand J. C. Penney’s line of footwear and accessory assortments but will also help it gain competitive advantage over other retailers. The company’s portfolio of private brands represented approximately 54% of total sales in the first quarter of fiscal 2010.

J. C. Penney’s well diversified supplier base, compelling portfolio, marketing campaigns, point-of-sale technology initiatives as well as effective cost and inventory management should drive sales and margin trends over the long term. The company also remains on track to deliver comparable-store sales growth and boost market share.

However, intense competition among retailers to woo shoppers by offering individualized brands will continue to weigh upon the company’s results. On June 16, 2010, Kohl’s Corporation (KSS) entered into a deal with Aldo, whereby the latter will design and produce a line of footwear for the company to be unveiled in spring 2011.

Consequently, we prefer to be Neutral on J. C. Penney. Our Zacks Rank #3, which translates into a short-term ‘Hold’ rating, correlates with our long-term recommendation.

PENNEY (JC) INC (JCP): Free Stock Analysis Report
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