$JCP 2012 Review @saletally

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$JCP 2012 Review @saletally

  1. 1. A Closer Look at JC Penney’s2012 “No Sale” Strategy
  2. 2. What happened to JCP in Fiscal 2012?• In FY 2012, JCP experimented with a controversial “no sale” strategy andimplemented “always low” pricing across its stores & website– At the same time, JCP’s immediate comps (Macy’s, Kohl’s, Target &Sears) continued to offer more traditional sale and coupon strategiesthroughout the year• Financially, the “no sale” strategy was not successful for JCP– Year over year, JCP’s revenue and gross margin (as % revenue) declinedin every quarter– Macy’s, Kohl’s, Sears & Target generally experienced yoy revenue growth• We reviewed JCP’s and its competitors’ digital marketing strategies; wefound some meaningful differences & opportunities for JCP– Year over year (March), JCP has demonstrated no growth in uniquewebsite visits(1)• Its direct comps experienced +10% to +22% growth over the sameperiod(1)– Recently, roughly 10% of JCP’s traffic has come from emails & social(2)• JCP’s comps appeared to perform better on Pinterest(2)2Notes:(1) Source: Compete.com(2) Source: SimiliarWeb
  3. 3. On 2/1/12 (the start of FQ1 2012), JCP announced its “fairand square” pricing model to consumers via generalmarketing emails3
  4. 4. JCP emphasized its no coupon / no sale message in marketingemails through FQ3 2012; however, by Holiday 2012, webegan to observe widespread promo codes and sales4FQ1 – FQ3 FQ4
  5. 5. During FY 2012, JCP’s share price consistently &significantly underperformed comps5Notes:(1) Source: Edgar & Google Finance(2) Indexed to 1/30/12 (first trading day of FQ1 2012)020406080100120140160180200$perShare(indexedto100on1/30/12)Historical Share Price Performance(1)(2)SearsTargetMacysJC PenneyKohlsFQ1 FQ2 FQ3 FQ4+7%+37%+27%(67)%+2%
  6. 6. JCP’s revenue was down every quarter yoy; while itscomps generally outperformed yoy, particularly inFQ46Notes:(1) Source: Edgar & SEC filings(2) Macy’s Fiscal Q2 ended on 7/30/12; all others Fiscal Q2 ended 7/28/12$3.9 $3.9 $4.0$5.4$3.2 $3.0 $2.9$3.9$5.9 $5.9 $5.9$8.7$6.1 $6.1 $6.1$9.4$9.5$10.1$9.4$12.5$9.3 $9.5$8.9$12.3$15.9 $16.2 $16.4$21.3$16.9 $16.8 $16.9$22.7$4.2 $4.2 $4.4$6.0$4.2 $4.2 $4.5$6.3$0$5$10$15$20$25FQ1 2011 FQ2 2011 FQ3 2011 FQ4 2011 FQ1 2012 FQ2 2012 FQ3 2012 FQ4 2012Fiscal 2012 Revenue ($Bn)(1)(2)JC PenneyMacysSearsTargetKohls
  7. 7. Macy’s, Sears & Target maintained yoy gross margin inFY2012, while JCP experienced declines in everyquarter7Notes:(1) Source: Edgr & SEC filings(2) Macy’s Fiscal Q2 ended on 7/30/12; all others Fiscal Q2 ended 7/28/1240.5%38.3%37.4%30.2%37.6%33.2%32.5%23.8%39.1%41.8%39.4%41.0%38.8%41.9%39.6%40.6%26.7%25.7% 25.5%24.5%27.7%26.7%25.4%25.8%32.0%33.1%31.9%29.6%31.6%32.7%31.7%28.9%38.1%40.7%38.6%36.2% 35.9%39.1%38.1%33.3%20.0%25.0%30.0%35.0%40.0%45.0%50.0%FQ1 2011 FQ2 2011 FQ3 2011 FQ4 2011 FQ1 2012 FQ2 2012 FQ3 2012 FQ4 2012Fiscal 2012 Gross Margin(1)(2)JC PenneyMacysSearsTargetKohls
  8. 8. In FQ2 and FQ3, JCP offered only a handful of sales, including:month-long 20-30% off swim, men’s shorts & polos, generalclearance, and free family photo & kids’ haircuts8Notes:(1) Source: Hipiti SaleTally database; sale information collected from retailers’ general marketing emails, web landing pages &twitter feeds(2) If same sale spans more than one period, it is counted as unique in each period4 320180134122181288255207 20566605257050100150200250300FQ1 2012 FQ2 2012 FQ3 2012 FQ4 2012Count of Unique Advertised Sales(1)(2)JC PenneyMacysSearsTarget
  9. 9. We observed JCP return to more widespread use of sales & promocodes in FQ4 (leading up to Holiday); FQ4 rev was +33% greaterthan FQ3 2012, but still (28)% less than FQ4 20119Notes:(1) Source: Hipiti SaleTally database; sale information collected from retailers’ general marketing emails, web landing pages &twitter feeds(2) % Sale Days in Period defined as = Unique Sale Days / Days in Period (% of days that offered at least one observed sale)40%32%92%98%91%98% 98%99% 98%100% 100%78%88%96%93%0%10%20%30%40%50%60%70%80%90%100%FQ1 2012 FQ2 2012 FQ3 2012 FQ4 2012% Sale Days in Period(1)(2)JC PenneyMacysSearsTarget
  10. 10. During FY 2012, JCP averaged 0.6x sales per day, whileMacy’s, Sears, Target averaged 7.2x, 11.0x and 3.3x salesper day, respectively10Notes:(1) Source: Hipiti SaleTally database; sale information collected from retailers’ general marketing emails, web landing pages &twitter feeds(2) Average sales per day defined as: Total Sale Days / Days in Period0.4x 0.3x1.5x9.1x6.6x 6.5x 6.5x14.1x9.6x9.2x11.2x3.6x 3.5x3.0x 3.1x0.0x2.0x4.0x6.0x8.0x10.0x12.0x14.0x16.0xFQ1 2012 FQ2 2012 FQ3 2012 FQ4 2012Average Advertised Sales per Day(1)(2)JC PenneyMacysSearsTarget
  11. 11. Our web traffic network analysis suggests there are 2-way relationshipsbetween JCP and Macy’s, Sears & Kohl’s, and a 1-way relationshipwhere shoppers who visit Target also visit JCP(1)(2)11Notes:(1) Source: Hipiti.com, SimilarWeb. We looked at who hipiti.com users mutually follow and the top website visits by shoppers whovisit a given site(2) 2-way relationship defined as: shoppers who visit Macy’s visit Kohl’s and vice-versa. 1-way relationship defined as: shopperswho visit Target also tend to visit JCP, but we do not observe the relationship the other way
  12. 12. March yoy, all of JCP’s comps experienced meaningfulgrowth in unique website visitors; while JCP was estimatedto be flat12Note:(1) Source: Compete.com0102030405060703/2012 4/2012 5/2012 6/2012 7/2012 8/2012 9/2012 10/2012 11/2012 12/2012 1/2013 2/2013 3/2013MillionsEstimated Unique Visitors: US Only, Web & Mobile(1)Sears.comTarget.comMacys.comjcpenney.comkohls.com+10%+22%+12%0%+10%FQ1 FQ2 FQ3 FQ4
  13. 13. Majority of JCP’s web traffic was driven by Direct & Search;Email & Social accounted for ~10% of total traffic. This isin-line with Macy’s & Kohl’s130.8%0.5%0.8%1.0% 0.5%8.6% 6.3%4.0%8.3% 10.3%0%10%20%30%40%50%60%70%80%90%100%jcpenney.com Sears.com Target.com Macys.com kohls.com%TotalTrafficWeb Traffic by Source: Last 3 Months(1)(2)Display AdsMailSocialSearchReferralsDirectNote:(1) Source: SimiliarWeb, Compete.com, Quantcast.com(2) Last 3 months since Early April 2013
  14. 14. 35.3%64.0%41.3%65.8% 68.0%43.4%18.6%40.6%16.8% 10.1%2.3%2.6% 3.6% 4.9%6.1%10.0%5.3% 5.7% 3.1%4.0%9.1% 9.4% 8.8% 9.5% 11.8%0%10%20%30%40%50%60%70%80%90%100%jcpenney.com Sears.com Target.com Macys.com kohls.com%TotalSocialTrafficSocial Web Traffic by Source: Last 3 MonthsOtherRedditPinterestYouTubeFacebookMajority of JCP’s social web traffic was driven by YouTube andFacebook; JCP appears to have an opportunity in Pinterest – JCP’scomps drive a greater % of traffic from that network14Note:(1) Source: SimiliarWeb, Compete.com, Quantcast.com(2) Last 3 months since Early April 2013
  15. 15. 15This presentation, and the oral presentation that supplements it, havebeen developed by and are proprietary to Katkar Flink Corporation, dbaas Hipiti and SaleTally (the “Company”) and were prepared exclusivelyfor the benefit and internal use of the recipient. Neither the printedpresentation nor the oral presentation that supplements it, nor any of theircontents, may be reproduced, distributed or used for any other purposewithout the prior written consent of Katkar Flink Corporation.The analyses contained herein rely upon information obtained from publicsources, the accuracy of which has not been verified, and cannot beassured, by Katkar Flink Corporation.This material is protected under applicable copyright laws and does notcarry any rights of publication.For more information, contact us at hello@saletally.com

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