JCPenney 2005 Annual Report Download - page 3

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To our stockholders:
Just over a year ago, our management
team developed a Long Range Plan to
move JCPenney from a position of
“turnaround” to a company focused on
growth - with the aim of achieving retail
industry leadership within five years.
Iam pleased to say that our solid performance in 2005
is a reflection of the relevance of that Plan - and the
commitment of all our associates to execute its initiatives.
Weare, in fact, well ahead of where we expected to be at this
time. Better still, there is significant additional opportunity
for us to continue to improve our operational and financial
performance and to more firmly establish JCPenney as
the preferred choice for the American moderate shopper.
highlights of our performance in 2005:
nOperating profit increased 22.5 percent from $1.3
billion to $1.6billion, and as a percent of sales rose
to 8.4 percent from 7.1 percent in 2004, a 130 basis
point improvement.
nIncome from continuing operations increased 48.7
percent in 2005, with diluted earnings per share from
continuing operations rising 74.1 percent for the year.
nPositive free cash flow exceeded $700 million.
nOur Company was upgraded to investment grade
credit ratings.
nWe opened 18 new stores – the most since the
mid-1990s.
nSales for jcp.com surpassed $1 billion.
our long range plan for leadership…
Our Long Range Plan consists of four integrated strategies
designed to reinforce our relationship with our current
customer and to motivate her to spend more with us; to attract
new customers; to engage and reinvigorate our associates;
and to improve our performance on a number of levels.
make an emotional
connection with our customer
Tobe our customer’s first choice, we need to
makean emotional connection with her.Specifically, we
must offer styles that inspireher, are relevant to her life,
and fit within her budget. Among our key initiatives are:
nLIFESTYLE MERCHANDISING: Our first step was to do a great deal of
strategic consumer research, from which we determined that our customers
fall into four distinct style categories: conservative, traditional, modern, and
trendy. We then looked at our merchandise assortments to make sure we
areaddressing the apparel and decorating needs of the customers who fall
into each of these style categories. Weidentified several opportunities and,
over the past year, we have had good success in pursuing them through a
series of new brand launches including, among others, a.n.a, a casual
weekend line for our modern customer; Miss Bisou in our juniors’ area; and
Solitude, a men’s casual line designed by surfer Shaun Tomson. We also
expanded our home assortments with the additions of Studio, designed with
the modern shopper in mind, and the Chris Madden Hotel Collection,
an expansion of our highly successful Chris Madden offering. You should
expect to see morebrand launches as we continually enhance our
assortments to ensure that we offer the styles our customers want.
nBRAND MANAGEMENT ORGANIZATION: Our merchandise assortments
consist of national brands, exclusive designer brands, such as nicole by
Nicole Miller,and private brands, which contribute morethan 40
percent of our annual revenue. With our legacy of strong sourcing and
manufacturing capabilities, our private brands deliver both better value
to the customer and higher margins. In an effort to continue to develop
and enhance our private brand offerings, JCPenney has appointed brand
managers who areresponsible for each of the major JCPenney brands.
These talented associates arefocused on brand consistency,from
design and lifestyle marketing to point-of-sale support. This is a unique
approach within the department store arena and one that is serving us
very well.
nIMPACTFUL MARKETING AND ADVERTISING: We also recognize that
the results of our work will mean nothing if we do not tell customers about it –
so we are, and with more impact. While we continue to actively promote our
sales and “smart prices,” a growing portion of our advertising and marketing
budget is now devoted to gaining recognition for the dramatic changes that
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strategy one
inside
letter from mike