JCPenney 2004 Annual Report Download - page 5

J.C. PENNEY COMPANY, INC.2 004 ANNUAL REPORT
3
It is with great pleasure that I write to you for the first time as
Chairman and Chief Executive Officer of JCPenney. I am honored
to have the opportunity to lead this great Company at a time when
significant progress has been made to restore its position as a
leading American retailer. This is reflected in the positive sales and
operating performance achieved in 2004.
My new role at JCPenney comes with the responsibility to grow
the Company’s business and its share of the retail marketplace.
Working with JCPenney’s outstanding associates, I look forward to
developing and implementing new long-term strategies to write the
next chapter of the Company’s history.
Teamwork – and the personal satisfaction of being part of a busi-
ness family – has been important to me throughout my career. As
Ihave become acquainted with the JCPenney family of associates,
the values of trust and integrity deeply rooted in the Company’s
founding philosophy are clear – and in perfect alignment with my
own.
ACHIEVEMENTS IN 2004
Our Department Stores, with an impressive 5.0% gain in compa-
rable store sales in 2004, exceeded the performance of all of our
key mall-based department store competitors for the fourth con-
secutive year. We enjoyed strong sales gains in every merchan-
dise division and in all areas of the country.
Moreover, for the first time in several years, we grew our
Company’s presence. In addition to opening seven mall-based
department stores, we opened seven stores off-mall. Early results
from these off-mall stores have been promising, and we believe this
new format will allow us to serve customers in locations currently
underserved by malls – and by JCPenney.
Merchandising, the primary focus of our repositioning effort for
the past several years, showed substantial improvement in 2004
through a skilled refinement of the key brands, categories, and
items most important to our customers. Coupled with an empha-
sis on consistent visual presentation standards and effective mar-
keting messages, we are creating a more appealing shopping
environment that offers compelling assortments for our customers.
At the same time, over the past year we began implementing ini-
tiatives designed to improve the effectiveness of our operations
and make it easier to shop at JCPenney. Among these was the
introduction of new state-of-the-art assortment planning and
allocation systems to
facilitate improved timing
of merchandise flow
and inventory levels.
Additional experience with
these sophisticated tools
will provide even greater
benefits and efficiencies.
Also, consistent with our
commitment to enhance
customer service and
reduce operational expens-
es, we have begun installing new point-of-sale technology in all
department stores. We will continue that process throughout 2005
and 2006. This new technology, with enhanced Internet capabili-
ties, provides easier and faster service for our customers.
Our use of technology to help our customers does not stop in
our stores. We are focused on offering the customer a seamless
shopping experience across all of our shopping channels – stores,
catalog, and Internet. Indeed, at JCPenney, our multi-channel
capabilities attract new customers and provide the very best com-
bination of choice and convenience of any retailer in the United
States.
Reflecting this, we are pleased by the performance of
Catalog/Internet, which contributed to the Company’s improved
results in 2004. Internet, in particular, continued its impressive
sales momentum, growing by 32% to over $800 million – and now
represents almost 30% of total JCPenney Catalog/Internet sales. In
November, we marked the 10-year anniversary of jcpenney.com,
which has become one of the leading apparel and home furnish-
ings sites in the retail industry.
Further evidence of our progress in the Department Store and
Catalog/Internet business this past year was our operating profit
margin of 7.1%, an increase of 66% over 2003. This solid per-
formance – fueled by strong sales growth and a focus on expense
management, gross margin, and process improvements – means
that we achieved the midpoint of our turnaround goal of 6% to 8%
operating profit a full year ahead of schedule.
Another noteworthy event in 2004 was the successful disposition
of the Eckerd Drugstore business, which generated net after-tax
cash proceeds of approximately $3.5 billion. After the sale, the
Company embarked on a major capital structure repositioning pro-
TO OUR STOCKHOLDERS
Myron E. Ullman, III, Chairman of the Board
and Chief Executive Officer