JCPenney 2015 Annual Report Download - page 28

Table of Contents
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The following discussion, which presents our results, should be read in conjunction with the accompanying Consolidated Financial Statements and notes
thereto, along with the Five-Year Financial and Operations Summaries, the risk factors and the cautionary statement regarding forward-looking information.
Unless otherwise indicated, all references in this Management’s Discussion and Analysis (MD&A) related to earnings/(loss) per share (EPS) are on a diluted
basis and all references to years relate to fiscal years rather than to calendar years.
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Our strategic framework is built upon the three pillars of private brands, omnichannel and revenue per customer.
Product differentiation, affordable style and quality and enhanced profitability are critical to the success of our private brands. With our team of designers
and our proprietary designs, we believe we can differentiate our private and exclusive brands from our competitors and the overall marketplace. Through our
private brand selection, we believe we can provide value to our customers by offering products with style and quality at an attractive price point. Lastly, with
our global sourcing infrastructure, we believe we are uniquely positioned to enhance our merchandise margins by managing product development costs and
maintaining flexibility with our price offerings. During 2015, private brand merchandise comprised 44% of total merchandise sales, as compared to 42% and
41% in 2014 and 2013, respectively. During 2015, 2014 and 2013, exclusive brand merchandise comprised 8%, 11% and 11%, respectively, of total
merchandise sales.
Our second strategic area of focus is omnichannel. With our heritage of being a catalog retailer, we believe we have the right foundation in place to enhance
our omnichannel capabilities. Today’s customer wants to decide when and how she wants to shop, whether in store or online using multiple personal devices.
Improving the omnichannel experience for our customers involves further development of our mobile apps, providing more fulfillment choices to the
customer and expanding our merchandise assortment. In 2015, we made significant improvements to our mobile app and began testing “buy online and pick
up in store same day.” We also intend to continue to expand our online assortment to increase sales and differentiate ourselves from pure e-commerce
competitors.
Our final strategic priority is revenue per customer. For 2016, we are focused on three initiatives to increase the frequency and amount customers spend on
every transaction. First, we plan to accelerate our growth of Sephora inside JCPenney locations. In 2015, we opened 28 additional Sephora locations,
bringing our total number of locations to 518, and introduced a selection of Sephora makeup, skincare and fragrance products to jcpenney.com. We plan to
add approximately 60 new Sephora locations in 2016. Second, we continue to enhance our salon environment through our rebranding initiative in
partnership with InStyle magazine. Third, for 2016 we plan to redesign the center core area, which includes fashion and fine jewelry, handbags, footwear,
sunglasses, and accessories, in approximately one-third of our stores.
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