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Apple exec as JCPenney CEO could be boon for beauty

BY Mike Troy

WHAT IT MEANS AND WHY IT’S IMPORTANT — The fate of beauty initiatives at JCPenney, along with a lot of the company’s other plans, just became a lot less clear following the hiring of former Apple executive Ron Johnson as CEO.

(THE NEWS: Ex-Apple exec fulfills dream, becomes JCPenney CEO. For the full story, click here)

Johnson previously served as SVP retail at Apple and isn’t due to join JCPenney in his new role until Nov. 1, but when he does, the guy who spent the past 11 years building Apple’s network of 300 worldwide stores is sure to bring with him some fresh ideas about how to accelerate growth at JCPenney’s 1,106 stores. In fact, Johnson contends reinventing the department stores is the single greatest opportunity in American retailing and in the press release announcing his appointment he said he looks forward to transforming the way America shops.

The company has been doing some transforming on its own the past few years to make its brand of retail more relevant to shoppers, but for the most part the changes have been incremental and results have been slow to materialize amid challenging economic conditions. One key initiative that stands out is an agreement with the Sephora division of the global luxury brand conglomerate LVMH to install 1,500-sq.-ft. Sephora branded beauty departments inside JCPenney stores. The new departments add some "wow" factor to the company¹s stores and address a major competitive shortcoming relative to other department store operators who offer prestige brands. However, the pace of the additions has been slow. Even though the agreement was announced in 2006, at the end of the first quarter there were only 254 Sephora departments inside JCPenney stores and that was after the addition of 23 new departments during the first quarter on top of the addition last year of 76 departments.

The potential to accelerate the rollout of this meaningful point of difference will likely be on a short list of priorities for a new CEO looking to execute transformational change. And an even deeper relationship with Sephora could also open new doors for JCPenney to tap into LVMH’s roster of other premium brands with all sorts of intriguing possibilities. Nothing is likely to happen anytime soon though as J.C. Penney’s merchandising priorities are set for the year and Johnson doesn’t join the company until Nov. 1. But when he does, the market has high expectations he will bring some of the Apple magic to J.C. Penney along with design sensibilities obtained during 15 years of merchandising experience gained at Target. Upon word that Johnson was joining J.C. Penney, the retailer’s share price surged $4.93.

Such optimism may ultimately be well founded, but for the time being it ignores gigantic differences between Apple and JCPenney. For starters, Johnson led Apple¹s retail efforts during a period when the company brought to market what was arguably the most innovative and differentiated product lineup the consumer electronics marketplace has ever seen. As a result, customers beat a path to Apple stores where they gladly paid premium prices and felt privileged to do so.

Conversely, JCPenney competes in a space with abundant competitors and operates stores that look remarkably similar to 30 years ago. The company offers a product mix of apparel, accessories, footwear and home goods that are largely undifferentiated and can be found at countless other locations at comparable or lower prices.

Johnson said he has always dreamed of leading a major retail company, but the top job at JCPenney could become a nightmare as the retailer faces countless challenges and there’s no Steve Jobs behind the curtain working on the next big idea that will send shoppers flocking to JCPenney stores.

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Let the speculation begin about Walmart Market

BY Mike Troy

WHAT IT MEANS AND WHY IT’S IMPORTANT — Walmart has rebranded the small-format food-and-drug combo store Neighborhood Market as Walmart Market.

(THE NEWS: Coming soon: More Walmart Market stores. For the full story, click here.)

Now the guessing game can begin about how many of the approximately 40,000-sq.-ft. stores the company ultimately might be able to open and the time frame in which the expansion could occur, given Walmart’s resources, available real estate and an army of assistant store managers who have undergone the retail equivalent of Navy Seal training by working in Walmart’s supercenters.

Bill Simon, president and CEO of the company’s U.S. stores division, made clear during an investor presentation on Thursday that the financial returns now are comparable to those of the company’s supercenters. That has encouraged the company to move faster with expanding the base of 155 domestic Walmart Market stores.

“There are 180 that have been approved through our real estate committee,” Simon said during a presentation at the William Blair & Company Growth Stock Conference. “We expect to have about 300 of them by 2013. The number for next year is approaching 100 that we’ll be able to put in.”

Simon referenced providing more details on the Walmart Market expansion in October, which is when the company holds its annual investor conference and reveals its capital expenditures budget for the coming year along with details around square footage expansion and stores openings by format type.

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Ex-Apple exec fulfills dream, becomes JCPenney CEO

BY Mike Troy

PLANO, Texas — Things just got a whole lot more interesting in the mid-tier department store space now that JCPenney has hired former Apple executive Ron Johnson to be its CEO. Johnson is a former Target merchandising executive who for the past 11 years oversaw the growth of Apple’s wildly successful and widely heralded retail operation.

In his new role at JCPenney, which he will assume on Nov. 1 when current CEO Mike Ullman relinquishes the position to become executive chairman, Johnson contends he is taking on a role that will allow him to pursue the single greatest opportunity in American retailing: reinventing the department store.

Johnson said he had always dreamed of leading a major retail company as CEO, adding, “I have tremendous confidence in JCPenney’s future and look forward to working with Mike Ullman, the executive board and the company’s 150,000 associates to transform the way America shops.”

For the past 11 years, Johnson served as SVP retail at Apple where he led the company’s retail strategy from inception to more than 300 locations worldwide. While the Apple retail network isn’t large, this is one situation where size doesn’t matter, as Apple stores’ approach to customer service and their operating model are widely praised.

Prior to Apple, Johnson spent 15 years at Target, last serving as VP merchandising. During his tenure at Target, he had responsibility for such categories as men’s apparel, women’s apparel and accessories, children’s and home. According to JCPenney, Johnson is most noted for launching and leading the design initiative at Target, which began with the Michael Graves collection for home and included several other such key brands as Calphalon, Carr, Bodum and more.

He also has an MBA from Harvard Business School and his Bachelor of Arts in economics from Stanford.

Given his background, outgoing CEO Ullman’s comment that, “I am delighted that Ron is joining our board and the company,” seemed like a bit of an understatement.

“He is widely recognized and highly regarded in the retail industry for his creativity and innovation, his commitment to empowering employees to deliver an unparalleled customer experience, and to making stores exciting places where people love to shop,” Ullman said. “His tremendous accomplishments at Apple and Target speak to his great consumer merchandising, marketing and operational talent.”

JCPenney won’t be losing the services of Ullman when Johnson assumes his new position later this year. Ullman, who joined the company as chairman and CEO in late 2004 will remain on the board. He also serves as deputy chairman of the Federal Reserve Bank of Dallas, sits on the board of Starbucks, the Retail Industry Leaders Association and is chairman of the board of Mercy Ships International.

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