Changes for a Penney

Of the 300 stockholders at the annual meeting of the J. C. Penney Co. in Manhattan last week none displayed more understandable satisfaction with the proceedings than the company's biggest individual stockholder: semi-retired Founder James Cash Penney, 89, who holds 258,018 shares worth $19.4 million. The 1,676-store chain reported that it passed $2 billion in sales last year for the first time, gained 9.9% in the first quarter of 1965, and expects a full year rise of from 4% to 6%. The irony is that this has been accomplished by reversing most of the guidelines that Founder Penney had followed since he opened his first store in 1902.

Quant & Mitzou. Under J. C.'s rule, 96% of Penney stock was in soft goods, cash was the key word, and Penney's familiar black and mustard-yellow signs were small-town landmarks. In Penney's new-look stores, 25% of the space is given over to such fast-moving and profitable hard goods as TV sets and washers; this year the company will move into plumbing supplies, nursery stock and musical instruments. The chain now has 5,500,000 charge-account customers who last year accounted for 30% of sales; moreover, it has opened 405 desks in Penney stores to take catalogue orders directly from shoppers or by telephone, and is adding 50 more to increase the $630 million business written up last year from its glossy 1,098-page, 65,000-item catalogue. Penney is about to build, in Bay Shore, L.I., its largest "new-generation" store, which will have three floors of merchandise, a restaurant, a beauty salon, and a 20-bay auto center that will dispense Penney gasoline and the company's Foremost* tires. Even the soft goods have changed dramatically: though Penney has kept its prices moderate, it now uses such stylish designers as London's Mary Quant and Mitzou of Madrid to create Penney dresses.

The change in Penney began in 1957 after executives looked at surging Sears, Roebuck and decided that their brand of merchandising would be obsolete by 1970. The prime mover was William M. Batten, a West Virginia storekeeper's son who clerked for Penney at 17 before studying economics. He undertook a two-year, 150-page study that proved so thorough that he was promoted from vice president to president and chief executive in 1958 to implement it. (In 1964, Batten moved up to chairman.) Besides remodeling small stores ("For years we were only in small towns," says Vice President William L. Marshall, "and we're not about to forsake them"), Penney moved into the cities and suburbs, expanded into hard goods, added 47 auto centers for shoppers on wheels. J. C. was finally persuaded that credit was essential, now says of the policy change he most opposed: "It seems to be working."

Waiting for 100. The changeover is not yet completed. This year Penney will build eight more stores that will average three times the space of stores opened five years ago, will relocate 26 stores and add 53 auto centers. In one Penney tradition that continues, the $40 million program will be financed out of cash reserves. By 1970, instead of being obsolete, Penney should be half again as big as it is now. Far from resenting the new look, J. C. Penney likes it so much that he plans a 100th birthday party eleven years from now to coincide with what he expects will be the chain's first $3 billion sales year.

* "Foremost" is a favorite Penney label. The Florida dairy with that name that J. C. founded in 1929, now has $415 million in annual sales. J. C. retains a minor interest.

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