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Locally, J.C. Penney stores have moved from downtown to suburban strip plazas to the malls.



Published: Sun, April 7, 2002 @ 12:00 a.m.



Locally, J.C. Penney stores have moved from downtown to suburban strip plazas to the malls.

By DON SHILLING

VINDICATOR BUSINESS EDITOR

YOUNGSTOWN -- As J.C. Penney Co. tries to work through the creaks of old age, it's pausing to recall the retailing successes of its first 100 years.

A weeklong sale begins Friday to commemorate the 100th anniversary of James Cash Penney's first store.

Area stores are holding other events as well. The Boardman store, for example, is displaying historical photos, and the Austintown store is inviting back retirees for cake and stories.

The corporation itself is promoting its 100th anniversary as part of its attempt to restore profit levels, which are under attack from discounters and newer chains such as Kohl's.

Facing such adversity is part of the company's heritage.

How it began: Penney opened his first dry goods store in a Wyoming mining town after his first store, a butcher shop, failed. The store's biggest customer stopped buying after Penney, a devout Christian, refused to provide him some whiskey on a Saturday night.

In the next 10 years, the country retailer became a big-city businessman. By 1913, he had 48 stores, changed the store names from Golden Rule to J.C. Penney and moved the corporate headquarters and his home to New York.

Penney was wiped out by the stock market crash of 1929, but within a few years, he had become a millionaire again.

The company expanded throughout the decades. Today, the Texas-based company has 1,075 stores and annual sales of $32 billion.

Local history: In the Mahoning and Shenango valleys, the company has survived 64 years by changing its retailing strategies. The company first arrived in the area in 1936 by opening a store in the retailing hot spot -- Federal Street in downtown Youngstown.

The store did well in the heyday of downtown retailing, and the company spent $375,000 to remodel it in 1957.

But times were already changing as more people were moving to the suburbs, and cars had replaced buses and trolleys as means of transportation.

J.C. Penney reached out to shoppers who were moving out of the central city by opening a store in the Mahoning Plaza in Youngstown in 1954, the Boardman Plaza in 1956 and the Liberty Plaza in 1958.

In 1963, it gave up on downtown. It closed the store, saying it could serve customers better from the outlying locations, which had newer and larger buildings.

Next, the malls: The next big change was moving stores into malls. First came a store in the Shenango Valley Mall in Hermitage in 1969, which was its biggest store in the area at the time. The next year, however, a store twice as large was built in the Southern Park Mall in Boardman. It replaced a store in the Boardman Plaza, which had been expanded several years earlier.

The move to malls continued in 1980 when a large store was opened in the Eastwood Mall in Niles.

Over the years, stores outside of malls were closed, including those in Warren, Liberty, Salem, New Castle, Grove City and Ellwood City.

The only nonmall J.C. Penney that remains in the area is in the Austintown Plaza. The store opened in 1988 when the Mahoning Plaza store was closed.

The Austintown store, which is about a third the size of the Boardman store, doesn't carry lines such as furniture and housewares and has a more limited selection of apparel.

The store succeeds, however, by attracting Austintown residents who don't want to drive to the malls and who enjoy being able to get in and out of the store quickly, said Kerry Rhodes, senior department manager.

Customers like not having to go to larger commercial strips in Boardman and Niles, he said.

"We have a very loyal, local customer base," he said.

Changing trend: Having most of its stores in malls is one reason J.C. Penney has struggled in recent years, said David Burns, marketing professor at Youngstown State University.

"People clearly are visiting malls a fewer number of times, substantially fewer. When they do go, they are shopping at fewer stores and spending less time," he said.

Major competitor: J.C. Penney also has been hurt by the emergence of Kohl's, a Wisconsin-based retailer with 350 stores. It is known for maintaining a low-cost structure because of its store design, lean staffing levels, sophisticated computer systems and efficient operations.

Key to Kohl's success has been a centralized buying department that has been able to put new fashions into stores faster than J.C. Penney, Burns said.

He said J.C. Penney tried last year to respond by revamping its buying departments to take away some of the flexibility that stores had in ordering merchandise.

Economics: J.C. Penney's stock has dropped dramatically as its profits declined. The stock reached $78 a share in 1998 but fell to $8 a share in 2000. It rebounded in the first half of last year and has remained at about $20 a share.

In 2000, the company's department stores and catalog operation posted an operating profit of $254 million, compared with $670 million in 1999 and $920 million in 1998. Its Eckerd drugstore unit recorded an operating loss of $76 million in 2000, compared with profits of $183 million in 1999 and $254 million in 1998.

Financial results for 2001 have not been announced. For the first time, the company has brought in an executive team from outside the company to lead the turnaround.

The company has focused on closing unprofitable stores, updating older stores, increasing advertising, improving merchandise, cutting expenses and modernizing systems to speed the flow of goods to stores.

The company says it is encouraged by early results. Stores open at least a year posted sales gains in eight months last year, including a 4 percent increase in the November-December holiday period.

Burns said the holiday sales increase was a pleasant surprise for the company because many retailers struggled. He attributed much of the gain to bringing out spring merchandise early.

Allen Questrom, Penney chairman and chief executive, said last year that the company will need two to four years to reach the levels he expects.

shilling@vindy.com




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