JC Penney new shops shine, rest of store sales tough

J.C. Penney Co Inc's (JCP.N) new shops within stores are doing much better than other parts of its department stores, but it is "way too early to draw conclusions" as the retailer is still rolling out the strategy, Chief Executive Ron Johnson said.

Comparable sales at the new shops within stores, including those selling IZOD sportswear and Levi's jeans, are running 20 percent higher than elsewhere in the stores, Johnson told analysts on Wednesday.

Investor enthusiasm for results at the new shops quickly faded when Johnson spoke about sales in the rest of the store.

"We had a back-to-school (season) that ... continued like it started; we were pretty pleased with it. The last two weeks have been much tougher than we planned," he said during a presentation in Texas that was also webcast.

Johnson conceded it was "way too early to draw conclusions" as the retailer has so far opened only 12 of the "stores-within-stores" 3 to 7 weeks ago.

Sales of denim overall during the back-to-school season were great, Johnson said.

Shares of J.C. Penney closed up 3 cents at $29.09 after rising more than 8 percent initially following Johnson's comments about sales at the stores-within-stores.

Under Johnson, J.C. Penney is planning to transform its stores into a collection of 100 specialty boutiques by 2015.

The strategy also included getting rid of coupons, leading to large sales drops early on as confused shoppers accustomed to discounts went elsewhere. In the second quarter, same-store sales fell 21.7 percent.

Activist investor William Ackman, whose Pershing Square Capital Management is Penney's largest shareholder, asked during the meeting about the company's store at the Stonebriar Centre shopping mall in Frisco, Texas, where updates have been made.

That store's look surpasses those of the chain's other stores and Penney is working on rolling such improvements out elsewhere, Johnson said.

"Presentation changes perception," Johnson said.

Penney is trying to lure slightly younger shoppers with a little more income than its current clientele. In the home category, it hopes that bringing in products from the likes of designer Jonathan Adler and architect Michael Graves will attract new shoppers to the 110-year-old chain.

Penney has the oldest customer in home goods compared with rivals Target Corp (TGT.N), Wal-Mart Stores Inc (WMT.N), Macy's Inc (M.N) and Kohl's Corp (KSS.N), Johnson said.

"We've got to get a younger customer," Johnson said.

(Reporting by Brad Dorfman in Chicago, additional reporting by Jessica Wohl; Editing by Gary Hill, Gunna Dickson and Richard Chang)

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