* Sells part of stake in Simon Property unit
* Set to open 3 in-store shops in hundreds of stores next
* Shares up 1 percent
By Martinne Geller
NEW YORK, July 23 J.C. Penney Co Inc
said it raised $248 million by selling part of its stake in a
Simon Property Group Inc unit, the first step toward its
goal of shedding non-core assets.
Shares of the retailer, which also unveiled on Monday the
first three of its new in-store shops, were up 1 percent in
Penney has been revamping stores, merchandise and strategy
under new Chief Executive Ron Johnson, who previously ran the
retail division at Apple Inc.
Johnson is trying to ignite Penney's sales and profits by
transforming the mid-tier department store into a hip place to
shop. He got rid of profit-sapping discounts that came to be a
Penney hallmark and is carving the stores into dozens of
in-store shops and boutiques dedicated to a particular brand or
"Johnson has a real vision of how he intends to remake
Penney, to make it a much cooler place to shop," said Gilford
Securities analyst Bernard Sosnick. "There's much to be said if
he can accomplish that goal, but having 20 new departments will
take time. In the meanwhile, sales are sliding."
On Monday, Penney unveiled the first three of its new
departments, displaying a focus on jeans timed to coincide with
the late summer back-to-school season, the second-most important
time of year for retailers.
Starting on Aug. 1, 683 Penney stores across the country
will have in-store shops dedicated to the Levi's and Arizona
brands, as well as a new brand called "i jeans by Buffalo."
At the men's Levi shops, shoppers can sit at a "denim bar,"
talk to iPad-toting "fit specialists" and choose from 11
different cuts and 88 different finishes or washes. At the
women's Levi's stores, consumers can shop by body type, using
their "curve ID," said Ben Fay, executive vice president of real
estate, store design and development.
That means women can identify themselves as having "slight
curves," "demi curves," or "bold curves," Fay, who worked with
Johnson at Apple, said.
Other in-store shops slated to open on Sept. 1 include JCP
men's and women's wear, Izod and Liz Claiborne.
Johnson started assembling a "dream team" last year to
execute the turnaround for the 110-year-old company. But last
month, a key member of the team, Michael Francis, left his
position as president, after a new advertising campaign flopped.
Penney said in May that same-store sales during the first
three months of its new pricing model fell a far
worse-than-expected 18.9 percent. It also posted a large net
loss and cut its dividend.
NEED FOR CASH?
While the current store changes only affect a portion of
J.C. Penney's stores, the company expects to have in-store shops
in all of its stores by 2015, said Fay.
He declined to provide details regarding the exact breakdown
of capital expenditures between Penney and the vendors it
partners with on the shops, though he did say that in some
cases, vendors were contributing.
J.C. Penney spokesman Joey Thomas said the stake sale
announced on Monday was "not because J.C. Penney needs cash".
"Simon Property Group is trading high, so market conditions
were favorable for us to monetize a portion of our holdings,"
Thomas said in an email.
Penney said it exchanged 2 million units of ownership in
Simon's subsidiary for $248 million, or $124 per unit -- a
discount to Simon's current stock price.
Simon Property shares closed at $156.97 on Friday.
"To me, it says that maybe their cash position was getting
low and that maybe they needed an infusion," said Gilford's
Following the transaction, JCP Realty Inc, a unit of the
department store chain, continues to hold about 205,000 limited
partnership units in Simon's operating partnership.
Gimme Credit analyst Carol Levinson said it was possible
that Penney could sell its remaining shares to raise cash as
Penney shares were up 21 cents, or 1 percent, at $20.83 in
afternoon trade on the New York Stock Exchange.