J.C. Penney Earnings Conference Call Nuggets: Marketing and Hiring Plans

J.C. Penney (NYSE:JCP) reported its third quarter earnings and in its subsequent conference call, the company answered the following analysts’ questions we thought you’d like to know.

Marketing

Adrianne Shapira – Goldman Sachs Research asked: It seems like a bright spot in the third quarter was expense control with marketing. What opportunities does that present for the fourth quarter? Will a dialing back of marketing be continued?

Myron E. (Mike) Ullman, III – Executive Chairman responded: We identified late last year and early this year, a transformation of our cost structure–part of that was getting out of the catalog business and part of the marketing numbers reflected in the print media was catalog-related.

We identified and committed to $50 million in savings for this fiscal year. We’re going to achieve that or slightly better.

The marketing expense actually had something to do with our competitors increasing their marketing during this period. We chose as a transition year not to build a bigger hurdle to clients in terms of promotion going forward. We’ve been optimizing the way we use our marketing dollars, whether it’s the amount of (pre-prints) or the geographic diversity of how customers respond to various types of media.

We don’t see any difference in the way we look at our cost savings in the fourth quarter than what we’ve seen in the first three. These cost savings were taken even in the face of increased costs for additional Sephora locations, Mango, Call It Spring, and so forth.

We feel that we’ve got a good foundation of cost control and there will be obviously more opportunities going forward.

Hiring

Matthew Boss – JPMorgan asked: Can you talk about what you’re seeing from a hiring standpoint at the store level? We’ve heard about the changes at the top but are there any changes in the level of talent that you’re seeing at the store level organization?

Myron E. (Mike) Ullman, III – Executive Chairman responded: With the voluntary early retirement program, we’ve got an opportunity in certain cases for people who had a celebrated career with us to chose and take an early retirement. It gives us an opportunity to bring in new people to J.C. Penney.

We’re excited for people to take advantage of that. We’re also excited about the opportunity that we’re seeing with a huge influx of people that are willing and want to have a career with us.

I think that the nature of our store staffing has been that we’ve put improved customer service in place by having more people when customers are in the store and modifying the staff when there’s less traffic. I think  the reason our customer service scores keep improving is we’re actually giving the customer a better experience.

I’m very optimistic about the quality of people we’re able to track. We want people for a career; we don’t want them for a week. I think our turnover has gone from over 100 percent, which is pretty traditional in retail, down to the 60’s. I think that’s an indication that the employees are having a good experience and that experience is translating into better customer relationships.

J.C. Penney Competitors to Watch During Earnings Season: Sears Holdings Corporation (NASDAQ:SHLD), Saks Incorporated (NYSE:SKS), Macy’s, Inc. (NYSE:M), Kohl’s Corporation (NYSE:KSS), Dillard’s, Inc. (NYSE:DDS), and Nordstrom, Inc. (NYSE:JWN).

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