After Marvin Ellison had his first earnings call as the new CEO at Penney, it left unanswered some big questions about the sustainability of his company on the expense front. Here’s my recent comment from RetailWire:
I’ve commented to consulting clients that the store count and the high expense structure are the big issues facing Mr. Ellison. Penney has a “legacy” problem of too many unproductive stores (by the sales-per-sq. foot standards of its competitors), and has always run much higher SG&A levels than its biggest national competitor — Kohl’s. The new CEO needs to tell us more about his plans to fix this.
So far, Mr. Ellison has said the right things about catching up on omnichannel, on improvements in supply chain management, and on some of the merchandising improvements started by Mike Ullman. (And the stores I’ve shopped look improved, especially in the re-engineered home store.) But simply rewinding to 2010 and trying to erase the errors of the Ron Johnson era isn’t enough to declare that JCPenney is a sustainable turnaround story, despite its opportunity to pick up share from Sears right now.