J.C. Penney Wakes Up, Starts Spending Big Bucks To Push Fall Sales

Last Updated Aug 26, 2010 2:34 PM EDT

J.C. Penney (JCP) may be ready to take chances with fashion in the fall selling season, following a year when conservative spending on inventories and promotions has been the rule for retailers.

Throughout 2009 and into 2010, retailers have focused on controlling inventory and related promotional costs to cope with a weak economy. Yet, in announcing first quarter results, Penney CEO Mike Ullman focused on expanding market share as much as fiscal discipline. That, coupled with guidance for faster sales growth, suggests the retailer is ready to invest in pushing sales and gaining ground on the competition.

J.C. Penney is preparing two major apparel launches for the fall. The Liz Claiborne brand will launch in 30 merchandise segments, including women's and men's apparel, accessories shoes and even home furnishings, to strengthen Penney's credentials as a department store that provides well-regarded (if not cutting-edge) fashion brands. J.C. Penny will be the only department store in the United States allowed to carry the Liz Claiborne and Claiborne brands for the deal's 10-year life. The store described two Claiborne brands it already carries, Liz & Co. (pictured) and Concepts by Claiborne, as among its best performing exclusive labels.

Also in the autumn, J.C. Penney is launching MNG by Mango -- an initiative designed to put the retailer in the "fast fashion" business. Generally defined as low-cost, quickly developed knock-offs of what shows up on fashion runways, fast fashion has been expanding rapidly in part due to the success of Mango, a Spanish retailer with over 1,000 specialty stores worldwide. Also key to fast-fashion expansion has been H&M (HMB), a multi-continental Swedish retailer that operates a large fraction of its stores in the U.S. The J.C. Penney deal will boost Mango's profile in the States while providing it with a fashion element that has a demonstrated appeal to younger shoppers

Enhancing fashion credentials is important to J.C. Penney, because it wants to position itself more as a traditional department store such as Macy's (M) than as a rival to Sears (SHLD) and Kohl's (KSS). The Liz Claiborne brand's history in department stores should help. Since Macy's has been taking out many regional department store chains in an acquisition spree, J.C. Penney can step into something of a void -- a nice place to operate in what otherwise is a crowded retail market.

That doesn't, however, mean that Penney's traditional competition -- let's throw in Target (TGT) for good measure -- is going to just give up. Kohl's has been particularly aggressive, adding brands such as Dana Buchman, a Liz Claiborne label. On the youth side, it has developed a label with musician Avril Lavigne and used singer Britney Spears to represent its critical Candie's brand.

Now, Kohl's is kicking off a deal with Oprah Winfrey that should strengthen its standing with women. More on that in an upcoming post.