J.C. Penney Co Inc (JCP.N) Chief Executive Ron Johnson said the retailer's new specialty shops within its stores would do well and bring in new customers, fueling optimism his turnaround plan may be taking hold.
His comments were made in a video posted late Tuesday to showcase the Liz Claiborne, IZOD and private label "jcp" shops set to open this weekend at 700 of its 1,100 stores. Earlier Tuesday, IZOD parent PVH Corp (PVH.N) made bullish statements about the upcoming IZOD stores.
Shares in Penney rose 3.7 percent to close at $26.23. They are still well below levels hit earlier this year, but up 39 percent from a more than 3-year low reached last month. PVH shares were up 1.1 percent at $93.82.
"People are starting to believe it could work," Morningstar analyst Paul Swinand said of Johnson's plan to transform Penney stores into a collection of 100 specialty boutiques by 2015, which started with Levi's stores on August 1.
The strategy also got rid of coupons, leading to large sales drops early on as confused shoppers used to discounts went elsewhere. In the second quarter, same-store sales fell 21.7 percent.
Sales of Levi's products at Penney rose 25 percent in the first days after the Levi's shops opened, Johnson said earlier this month.
In the video, taped August 22, he said the Levi's stores continue to be a hit, saying "customer response has been off the charts."
Indeed, the Penney store in Manhattan was busy on Wednesday afternoon, with shoppers browsing through racks of jeans and t-shirts and Levi's store and in nearby areas.
Johnson also predicted the new shops for men and women for its new jcp private label line would bring in new shoppers and find favor with Penney's long time customers.
Opening Izod shops at Penney starting on September 1 gives PVH "a high degree of confidence that we will see a dramatic improvement in this business beginning in the third quarter of 2012," PVH CEO Manny Chirico said during a call on Tuesday.
Sales of IZOD products at Penney slumped after the new pricing kicked in February.
(Reporting by Phil Wahba in New York; Editing by Richard Chang)