J.C. Penney Mango Deal Challenges H&M, Links to Young Women (even Scarlett Johannson)

J.C. Penney (JCP) may have grown a little envious of H&M (HMB) and has developed a deal with another international retailer that will put it in fast fashion. H&M has been a master of that. Developing stylish inexpensive apparel on a seasonal basis, H&M might even be called a seller of disposable fashion. Its casual styles are so inexpensive that customers can wear them for the season and then replace them for next.

Along with France and a couple of other countries, Stockholm-based H&M has made the United States one of its focus areas for a 2009 store expansion that totals 225 stores. It opened about 200 in 2008 and had around 1,700 operating under its own auspices or as franchises in 33 countries at last year's end.

The United States, where it has been in operation only since 2000, was its third largest sales market in 2008 barely trailing France although only a third as lucrative as Germany, its top revenue generator among nations.

H&M has been opening stores in and around the same locations where J.C. Penney operates. It even has a store across Herald Square from Penney's new Manhattan location. Clearly, J.C. Penney knows that H&M represents competition particularly for younger shoppers, and that's a group that the company has been trying to entice. The retailer has been adding more fashion developed to have a particular appeal to youth, such as I Heart Ronson. In the label, a graphic of a heart replaces the word. It's a youth thing.

To get in on fast-fashion opportunities, and maybe pull in more of the youth market, J.C. Penney has struck a deal with fast-fashion chain, Mango, to become the exclusive U.S. department store retailer for the brand MNG by Mango.

Another far-flung operation, Spanish retailer Mango has 1,300 stores in 94 countries and focuses on developing European runway fashion in a more affordable variations. Mango already operates 12 stores in the United States.

J.C. Penney will launch MNG by Mango as a specialty shop within its stores. Each will encompass about 1,000 square feet and anchor a new contemporary fashion section at the center of the women's apparel department. Women's apparel is its top-performing division, the company notes, and new customers who come in to check out MNG will have to walk through the entire women's department to get at the new brand. Once in Mango territory, they'll get a gander at other leading J.C. Penney exclusive brands, including, besides I Heart Ronson, Bisou Bisou, ALLEN B. and she said. The contemporary fashion presentation will be adjacent to J.C. Penney's Sephora shops.

J.C. Penney intends the MNG by Mango rollout to be the largest ever of any fast-fashion operation, it stated. In the first phase, MNG by Mango shops will spring up in 75 of its stores and on jcp.com. By Fall 2011, MNG by Mango departments will operate in 600 J.C. Penney locations. It also intends major advertising support, and the fact that Mango's current spokesmodel is actress Scarlett Johansson won't hurt J.C. Penney's chances of getting additional publicity for the move.

"Fast fashion for the young, modern woman is our highest potential business opportunity," Mike Ullman, J.C. Penney's chairman, commented in a statement the company made announcing the partnership. "We have long been intrigued with fast fashion, and through the recent launches of our own private brands, she said and City Streets, we've experienced great success and confidence in expanding this offering to our customers. We've definitely been stepping up our style over the last several years, and having MNG by Mango exclusively will further establish J.C. Penney as a first choice destination for the best, affordable contemporary fast fashion in the U.S."

It's easy to think of the last part of Ullman's statement as a shot across H&M's bow.

In an interesting twist on the whole competitive angle, H&M sales in the United States haven't been so good lately. Recessionary problems in the U.S., as well as in France and Spain, helped drive down H&M's comparable store sales -- those in locations open for at least 12 months -- by six percent over the first nine months of the fiscal year. The company reports that consumers are bargain hunting more and said that a significant comp decline in August, down 11 percent, was partially due to the speed with which its summer clearance items flew out of U.S. stores. H&M didn't have much holdover clearance inventory for late summer, and that hurt it's ability to keep up the pace of sales. Things aren't quite as bad these days, but H&M still registered a three percent comparable store sales decline in October.