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J.C. Penney's Strategic Revitalization Plan: Industry Analysis and New Pricing Strategy

J.C. Penney is undertaking a significant transformation aimed at boosting sales, focusing on renovation plans, and a new pricing strategy to attract more loyal, frequent customers. The company will implement "everyday low prices," with apparel contributing 57% of its sales. The project begins this August and will include a prototype store. Competitors like Macy’s are impacting market share, while J.C. Penney aims to distinguish itself through innovative merchandising and marketing. Financial analyses indicate the company is currently overvalued.

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J.C. Penney's Strategic Revitalization Plan: Industry Analysis and New Pricing Strategy

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  1. J.C. Penney Riley Coy Chris Wahl Jon Lambert

  2. Agenda Recommendation Industry Analysis Capital Analysis Financial Statement Analysis

  3. New Pricing Strategy • Distinguish company • More loyal, frequent customers • “Everyday low prices” • Apparel is 57% of Sales

  4. Renovations • Prototype store • Sales figures doubled • Project begins August this year • New merchandizing and marketing chief; VP of real estate, store design and development • Boutique shops offer pricing power • Sephora, MCG by Mango, Michael Graves, Jonathon Adler, Betsy Johnson

  5. Impact of Competitors • Department stores losing market share • Department stores expected 1.7%;retail- 3.4%

  6. Impact of Competitors (cont’d) • “The days of everyone offering the same-old, same-old thing are over…”- Customer Growth Partners • Martha Stewart Living • Lawsuit • Macy’s taking market share • JCP at 3%

  7. Beta

  8. WACC Cost of Debt: 7.41% Cost of Equity: 7.45% WACC: 5.67%

  9. NPV Average Total NPV: $7,334.02 Intrinsic Value: $3.40 Overvalued: 86.619%

  10. Financial Statement Analysis-Balance Sheet

  11. Financial Statement Analysis-Balance Sheet

  12. Financial Statement Analysis-Income Statement

  13. Financial Statement Analysis-Key Ratios as of 4/28/2012 ROA — (5.82%) ROI — (12.81%) Quick — .34 LTD to Equity — .73 Interest Coverage — 0

  14. Contact Jonathan.lambert@brooks.com Christopher.wahl@brooks.com Riley.coy@brooks.com

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