JC Penney's Fortunes Follow The US Economy

Retailer JCPenney has been as reliable a barometer of US economic swings as any, according to Financial Times. Penney's store sales have tracked almost precisely with economic ups and downs. Penney's sales dropped in the summer of 2007 during a retail slowdown, and again sagged in September and October 2008 after the Wall Street meltdown.

Now Penney is hoping the holiday season will put an end to economic doldrums in the U.S. and is readying a different strategy from last year, when it aggressively discounted its merchandise to move inventory. This holiday season, Penney will offer promotions, but will try to be more selective.

Penney's CEO Mike Ullman expects the holiday shopper "to focus on need, and focus on the basics, and less on the most discretionary items like fine jewelry or bigger ticket home items." That's why Penney will be sensitive to what the shopper wants, "instead of what we didn't sell last month and the previous month," says Ullman.

JC Penney has benefited from the hard times in certain ways. It was able to capitalize on last year's bankruptcy of Mervyn's, a West Coast competitor. Penney isn't delaying expansion plans either – next year, the retailer will become the exclusive seller of Liz Claiborne women's clothing.

Still, Penney has to update its business model, especially in the mail order arena. The company just announced it will no longer publish its "big book" catalog – a compendium of all products. Instead, JCPenney will follow mail order competitors like Sears, who now publishes only specialty catalogs in print, such as Tools, Workwear, and a holiday "Wishbook."

JC Penney will follow suit, continuing to publish its Christmas catalog and other smaller catalogs targeting particular niches, such as the women's apparel "Little Red Book," but the twice-yearly giant general catalog will be suspended. Penney will save as much as 30% in paper costs in 2010, says The New York Times.

Retailers dropping print catalogs in favor of online marketing is just another sign of adapting to a new economy and a new consumer landscape.