J.C. Penney department stores have recorded an 85% decline in operating profits.
US department store chain J.C. Penney this week announced its Q2 results. Although Eckerd’s – its drug store division – more than quadrupled its operating profits, the department and catalog sector produced a Q2 operating profit of $11 million, compared with $74 million last year, which represents an 85% decline. J.C. Penney attributed the steep decline in profits to a 23.3% decrease in catalog sales. This sales decrease was largely the result of a planned delay in the distribution of the Fall/Winter catalog.
However, this may have been a misguided decision since, if the decision to delay distribution of the catalog was due to concern that customers might lose or misplace it before the Fall season begins, J.C. Penney should have placed more emphasis on its online catalog.
Despite the flood of dotcoms failures, eCommerce is alive and gathering steam. Undeterred by current economic downturn, 70% more Americans shopped online compared to last year, boosting eCommerce revenues to $28.1 billion in 2000. This is a 79% increase from spending in 1999. The online catalog would have allowed J.C Penney to offer its collection early to satisfy shoppers who prefer to purchase items far ahead of the season while making sure that late customers will still have access to the catalog at their convenience.
In the future, J.C. Penney should focus more on the online version of its catalog. In 1999, its online department store catalog made up just 6% of its overall department store and catalog segment, recording $1.14 billion in sales. While online sales have increased since then, the figure will still be well short of the levels the company should be aiming for.
