Bridge Plan to help JCPenny maintain financial flexibility
26 Jun '08
3 min read
J. C. Penney Company Inc provided an update on certain components of its Bridge Plan, including a further reduction in capital expenditures for 2009. The Bridge Plan is designed to allow JCPenney to successfully navigate the current environment, to maintain strong financial flexibility, and to benefit when conditions improve.
We have just completed our strategic planning process for the coming year, a period that we expect to remain very challenging for the American consumer, said Myron E. (Mike) Ullman, III, chairman and chief executive officer.
In light of this, we are taking additional steps under our Bridge Plan to effectively balance support of the merchandise and marketing initiatives that differentiate JCPenney with the goal of maintaining a strong financial position.
To this end, we will further reduce new store openings and renovations from 2008 levels and continue to focus on rigorously controlling inventory levels and operating expenses.
Ullman continued, We believe the combination of our merchandising, marketing and pricing programs, together with our prudent capital expenditure plans will allow us to minimize the impact of the difficult retail environment and improve both our competitive positioning and market share.
JCPenney's plans for 2009 now call for a reduction in capital expenditures to approximately $650 million, versus $1 billion expected for 2008, and $1.2 billion in 2007.
• This reflects plans to open 20 new or relocated stores in 2009, down from 36 new or relocated stores that will open, in total, in 2008. This compares to previous plans to open 50 stores each year through 2011. Among the stores that will open in late 2009 is the Company's first store in Manhattan, which is expected to be its highest sales volume location.
• The Company has also reduced its renovation plans to 10-15 stores in 2009, down from the 20 renovations it expects to complete in 2008 and compared to its previous plans to renovate 65 stores each year through 2011.
• The Company continues to expect total inventories to be below2007 levels by the end of the 2008 back-to-school season. Going forward, the Company will continue to plan inventory levels in alignment with sales expectations.
• With better inventory alignment in the second half of 2008, the Company continues to expect year-over-year gross margin trends to improve in the third and fourth quarters. Operating expenses will be managed carefully, but ratios are expected to remain under pressure from increases associated with new stores as well as lower sales levels.