Penney's American Living line already marked down

By Nicole Maestri

NEW YORK, Feb 25 (Reuters) - One day after J.C. Penney Co Inc (JCP.N: Quote, Profile, Research, Stock Buzz) launched the advertising campaign for its newest brand, American Living, the mid-tier department store operator has slashed prices for the upscale line by roughly 25 to 40 percent on its Web site.

American Living, which began arriving in Penney's stores earlier this month, is the biggest merchandise launch in the retailer's 105-year history, and Penney rolled out the ads for the brand during the Academy Awards television broadcast on Sunday.

The collection, developed by Polo Ralph Lauren Corp's (RL.N: Quote, Profile, Research, Stock Buzz) Global Brand Concepts, includes clothes, shoes, handbags, luggage and bedding infused with an Americana feel.

The line is forecast to eventually generate annual sales of $1 billion, and Penney said the products will be priced at the top end of what it sells in each category.

But American Living is landing in Penney's stores, catalogs and online as the retailer's middle-income shoppers pull back on spending, squeezed by falling home values, high energy cost and rising food prices.

Last week, Penney reported a nearly 10 percent drop in quarterly profit and said there is no clear indication the consumer environment will improve this year.

In interviews leading up to the launch, Penney executives said they did not scale back plans for the American Living launch due to the tough economic climate. While American Living will have a "promotional" element, they said they were not worried about its higher prices.

"We will promote the line," said Michael Boylson, Penney's chief marketing officer, in an interview earlier this month. "But we're not going to give it away at half price."