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July 22, 2009 > J.C. Penney takes on Manhattan

J.C. Penney takes on Manhattan

By Anne D'Innocenzio, AP Retail Writer

NEW YORK (AP), Jul 17 _ Could the real miracle now be on 33rd Street?

Department store chain J.C. Penney Co. thinks so, as it prepares for the July 31 opening of its first Manhattan store, just a block from Macy's towering flagship in Herald Square.

The new store is key to Penney's campaign to boost sales by shedding its reputation for dowdiness, an effort that in recent years has included adding exclusive affordable collections from designer Nicole Miller, home furnishings from home maven Chris Madden and trendy in-store Sephora cosmetics shops.

Penney, which expects the store to be its largest sales generator, believes even New York fashionistas are looking for affordable options as the recession maintains its grip. But Wall Street is taking note of the changing Manhattan retail landscape and will watch who shops at Penney and whether they are defecting from rivals like Macy's, a fixture since 1902 in Herald Square, where the Christmas movie ``Miracle on 34th Street'' is set.

``Penney's has been around for a long time, but it hasn't had the visibility of its competitors,'' said Faith Hope Consolo, chairman of real estate firm Prudential Douglas Elliman's retail leasing sales division.

Consolo said higher-priced Macy's and even the neighborhood's Victoria's Secret store, have ``reason to be concerned'' because Penney is likely to draw a full cross-section of the 250,000 shoppers who store officials say visit the area daily.

Penney, which usually sticks to staid radio and print ads to promote store openings, seems to be having fun ruffling feathers in the historic retail Mecca.

``We hear Herald Square needed a good department store,'' one bus shelter proclaims. And another: ``The real miracle is now on 33rd Street.''

But Macy's spokesman Jim Sluzewski declined to comment, pointing out only that the 2.2 million-square-foot flagship is the world's largest store and one of New York's biggest tourist attractions.

Sales at Plano, Texas-based Penney, which has 1,000 stores across the U.S., have stalled and profits dropped since the recession began in late 2007 and shoppers started cutting back on discretionary items like fashion. But competitors like Macy's have suffered more, slashing its work force and closing stores. Penney's has only slowed store expansion and cut inventory.

The average 7.8 percent sales decline since February at Penney stores open at least a year compares with 7 percent at Kohl's Corp. and 9 percent at Macy's.

Competitively priced trendy merchandise has been Penney's strong suit in the recession, said Chief Marketing Officer Mike Boylson, while mid-priced basics and big-ticket items like furniture and jewelry have been weak.

Penney already operates stores in the Bronx, Staten Island and Queens, but Boylson believes the Manhattan store ``is going to have a halo effect on the entire brand.''

When Penney's opened a temporary store in Times Square in spring 2006, sales immediately rose in its borough locations and Jersey City and stayed higher until the recession began, Boylson said.

Given the recession _ and how expensive it is to live in Manhattan _ Boylson believes customers will appreciate Penney's lower prices, like dresses that top at about $90.

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