JCPenney 2002 Annual Report Download - page 4

2002 annual report J. C. Penney Company, Inc. 1
JCPenney achieved its sales and profit objectives for 2002, the
second full year of our stated five-year turnaround plan. Amid
continuing changes in the competitive landscape, our results
stood out, despite an uncertain economy and a challenging hol-
iday season for the industry. I am proud of our professional and
dedicated team of associates who, for the second consecutive
year, met their operating performance goals and remain com-
mitted to our turnaround objectives.
Each of our businesses made significant progress. For depart-
ment stores, 2002’s comparable store sales growth of 2.6% was
among the best in the retail industry. With gross margin
improvement and careful expense management, we achieved an
EBIT of nearly 4%, which positions us to meet our stated objec-
tive of 6% to 8% EBIT by 2005.
We continued to reposition our catalog business. Sales were
planned for a decline, but came in below expectations. However,
with continued growth in internet sales, good inventory man-
agement, careful expense control and certain policy changes,
catalog and internet further improved on its contribution to
overall Department Store and Catalog segment profits.
In 2002, Eckerd achieved record sales, record profits, and
served more customers than at any time in its history. And,
comparable store sales growth of 5.2%, and a 3% EBIT, represent
substantial progress toward our EBIT objective of 4% to 4.5% by
year-end 2003.
DEPARTMENT STORES AND CATALOG
Department Stores
2002 can be characterized as the year we moved toward full
implementation of our new centralized merchandising, market-
ing and operating processes. I am confident that, barring any
adverse impact from geopolitical developments, we remain
squarely on track to meet our stated 2005 objectives.
The department store team remains committed to improve-
ments on the five key initiatives – merchandise, marketing, store
environment, expense control and people – that have been our
focus since the beginning of our turnaround efforts.
The merchandise team gave customers a narrowed assortment
of fashionable, trend-right merchandise packed with value and
made improvements on in-stock coverage for advertised items.
The merchandise support group opened 10 of 13 new store
support centers in 2002, as planned. These centers, which service
875 stores, came on line under budget, on schedule, and with
virtually no disruption to normal store operations. Consequently,
we made significant improvements in our merchandise flow and
replenishment of the right stock at the right time.
The marketing efforts of this past year played a significant role in
the Company’s successful results. Through a strategic and highly
competitive mix of promotional
and institutional campaigns, the
marketing team successfully com-
municated a consistent value mes-
sage to our customer and brought
her back into our stores.
Our store teams have reduced
the clutter and improved the
visual consistency and excitement
of our store formats. Appealing,
dominant and clearly signed
merchandise presentations have
made our stores more attractive and easier for our customer to
navigate and shop. We installed 3,800 new centralized checkout
stations this past year. They have allowed us to efficiently serve
the customer when she is ready to pay for her selections, and
have provided expense savings from the reduction of redundant
staffing at registers previously located throughout the store.
Catalog and Internet
Despite declining sales for catalog, we remain firmly committed
to the direct-to-consumer business and to finding ways to capital-
ize on our competitive advantage of being a three-channel retailer.
The internet business, supported by the catalog infrastructure,
remains the fastest growing part of our business.
Over the past year, the catalog team has been refining mer-
chandise assortments and page presentation, downsizing the
infrastructure and eliminating those practices and catalogs that
were unprofitable. While these changes had a negative impact
on sales, the focus on inventory management and expense sav-
ings allowed catalog and internet to contribute to the operating
profit improvement in 2002. We believe the changes taking
place are required in order to achieve a competitive level of prof-
itability over the long term.
ECKERD
With 2,686 pharmacies in 21 states, dispensing about 200 mil-
lion prescriptions annually, Eckerd is well positioned to capitalize
on a business being fueled by an aging population. We have a
pharmacy workforce of more than 16,000 associates serving
more than 30 million patients, and, true to our founding as a
pharmacy first, we are proud to be recognized by our customers
as first and foremost a pharmacy health-care provider.
In the front end of our stores, we are intensifying our focus on
two key areas: beauty and digital photo processing. In beauty,
we have launched a major new program called “Feeling Beautiful
Starts Here,” and we have made a commitment to value pricing
and a breadth of assortment in cosmetics and fragrances that is
To Our Stockholders
Allen Questrom, Chairman of the
Board and Chief Executive Officer