JCPenney 2008 Annual Report Download - page 4

4
Showing Our CUSTOMERS That What
Matters to Them, Matters to Us
Our Every Day Matters philosophy centers on showing our
customers that what matters to them, matters to us. This means
demonstrating that we understand the nancial pressures they
are under and making it clear why they should choose us above
all others.
Most critical to this is that while we are maintaining the affordability
JCPenney is known for, we are “stepping up” the style and fashion
across our merchandise assortments by:
• building our portfolio of Exclusive Brands designed by some
of the world’s fashion leaders;
• continuing to enhance American Living, a new tradition in
American style exclusively designed by Polo Ralph Lauren’s
Global Brand Concepts;
• introducing new Private Brands to address underrepresented
parts of our business, and further rening the style of our
leading private brands: Worthington, Stafford, The Original
Arizona Jean Co. and St. John’s Bay; and,
• reinforcing our position as the “headquarters” for some of the
country’s most desired National Brands.
Examples of the great style we offer can be seen throughout the
pages of this Summary Annual Report.
Although mall trafc was down substantially in the second half of
2008, we believe that the style and quality of our merchandise,
coupled with our marketing and highly compelling promotions,
helped to drive trafc levels in our stores that were higher than the
mall overall, as well as to attract customers to our off-mall stores
and jcp.com.
We are also bringing excitement into our stores by accelerating
our roll-out of Sephora inside JCPenney. The more than 100
locations we have today are generating strong sales, and leading
customers to shop across the store as well. We plan to have
more than 150 locations by the end of 2009. To ensure we are
most effectively communicating to our customers the newness
and value we offer, we are executing updated marketing strategies
that better leverage new media outlets to reach our customers
and answer the question, “Why JCPenney?” In addition, we are
showing our existing customers that we appreciate their loyalty
by continuing to expand “JCP Rewards,” a program that allows
members to receive special offers and benets.
We are also continuing to invest in our digital platform, which
includes maintaining jcp.com’s industry-leading position as the
largest general merchandise website on the Internet. In doing this,
we are focused on staying current with customer-facing technology
trends, and how consumers use this technology, so we can reach
them directly and make it easier for them to shop JCPenney.
Dear JCPenney Stockholders:
In the face of a rapidly declining economy, JCPenney took
substantial steps in 2008 to position our business to effectively
deliver results for those most important to us — our Customers,
our Associates and our Investors. Our blueprint for effectively
managing through the economic downturn is our Bridge Plan,
which focuses on those initiatives that we continue to Accelerate,
Maintain or Moderate in order to put us back on the trajectory of
our Long-Range Plan for retail growth and leadership when the
environment improves.
In short, we are focused on tightly managing all aspects of our
business that are in our control, in order to best offset the impact
of the deep decline in consumer condence and spending that
began in the latter part of 2007. The actions we took allowed us
to bolster our nancial position in 2008. While we had operating
income of $1.1 billion compared to $1.9 billion in 2007, we
generated positive free cash ow and ended the year with
approximately $2.4 billion of cash on our balance sheet — making
us one of the best capitalized retailers in the industry with among
the lowest “cash burn” rates. Based on this, we were able to
maintain our annual cash dividend at $0.80 per share.
As we look ahead, our nancial and operating exibility puts
us in a strong competitive position relative to our mall-based
competitors. Given our expectation that these challenging
economic conditions will persist for the foreseeable future,
we are continuing to execute our Bridge Plan to withstand
these headwinds and grow our market share when the
environment improves.