New York–Despite its larger-than-expected first quarter loss and a 20% slump in its sales, JCPenney’s largest shareholder and board member William Ackman said Tuesday that he has complete faith in the department store’s “Fair and Square” strategy.
Ackman, who is ceo and founder of Pershing Square Capital, which holds an 18% stake in JCPenney, was interviewed on CNBC’s “Squawk Box” and asked about the everyday low price strategy that JCPenney’s CEO Ron Johnson instituted earlier this year. Ackman said he was unfazed about the retailer’s latest earnings because he is fully behind Johnson and believes the strategy is right—and will work.
“It’s a difficult transition,” Ackman said. “There are some extreme couponing customers, who we probably lost money on, who may not come back, but the people who are focused on quality and value, and ultimately product, we should do very well.”
Noting that he has “a lot of patience” for the strategy to reach its full potential, Ackman said that as more of the strategy is revealed, including the mall-within-a-store concept planned for JCPenney stores, the stronger the case will be for JCPenney’s success.
“Time is your friend because eventually people will get it,” added Ackman.
Building a “Mall within a Mall”
So far, JCPenney has been mum on the subject of what brands or shops might be included in its Main Street of shops. Ackman said more details would be released in August, including the addition of new technology that could change the customer experience.
When speaking with retail analysts following its first quarter report, JCPenney executives shed some light on the new shop concepts, which have been linked with designers and brands such as Cynthia Rowley, Tourneau, Michael Graves, Betsey Johnson, Vivienne Tam, Lulu Guiness and Nike.
Johnson said the shops will first appear in about 700 stores with three type of installations: a 2,000 square foot “store” that will feel like a complete storefront and house major home brands like Martha Stewart; “shops” which will be about 500 square feet, and a “boutique” of about 300 square feet that not have walls but still give a brand presentation like “you’d see at Selfridges in the U.K.”
While the majority of shop concepts will be kept confidential for now, Johnson said one would be Watchgear by Tourneau, the watch specialty retailer’s lower end store.
“So Tourneau is kind of going to do for watches as…what Sephora did for cosmetics,” Johnson said, that Sephora’s shops in JCPenney gave the store access to more brands and a new shopping environment.
Noting the strength of Tourneau’s watch presentations at its Time Machine flagship on East 57th Street in Manhattan, Johnson said, “The Tourneau team is working with all their suppliers and talking about which ones want to be connected with JCPenney and which were the right ones for us.” Although JCPenney will get new, higher pricepoints in watches as a result, Johnson noted they “we won’t be as high as 57th Street.”
Johnson said big brands are part of the focus, and he cited Levi’s and Nike as examples.
“We can do shops in categories we are not in today and we will tell you about those going forward,” Johnson said. “There a variety of categories we are not in whether that’s in food and beverage or other hard line categories. So as we go forward you will learn more about our shop strategy but it’s really pretty unlimited.”
In recent interviews, Ackman compared JCPenney’s shop concept to constructing a “mall within a mall,” allowing for key brands like a Nike or Tourneau to build small boutiques inside JCPenney. While these brand would have to pay malls $40 a square foot, they only pay $2 at JCPenney, Ackman said.