Dear JCPenney Stockholders:
Over the past year, the economic pressure on American families
increased dramatically, impacting our Company and our industry.
Within this tough climate, I am proud of the performance of our
Associates and the competitive advantage we are continuing to build.
And I have even more conﬁdence in the strength of the Long-Range
Plan strategies we are pursuing to become the growth leader in the
In periods like this, our customers are relying on us more than ever to
provide merchandise that has the great style and quality they are
looking for at smart prices, and a shopping experience that is
With this in mind, as the economic downturn began in mid-2007, we
continued to put our customers at the center of all that we did. We
also took action to reduce expenses and manage our inventories,
enabling us to maintain the ﬁnancial strength and ﬂexibility to support
our Long-Range Plan, while taking steps to reﬂect current realities.
For 2008, our intention is to focus even more intently on putting our
This will be evident in the strength of our merchandise
offerings, the emotional connection of our marketing and promotions,
and most of all, in the way our Associates interact with our customers.
In short, our “Every Day Matters” philosophy will be more apparent
than ever as we work to achieve our goal of being the preferred
shopping choice for America’s families.
A Year of Challenge and Triumphs
While we began to see evidence
of a slowdown in early 2007, the drop in home sales and prices,
tighter consumer credit and escalating fuel and food prices led to a
precipitous decline in U.S. consumer spending in the second half.
we recognized the change in the retail environment, we acted to
address these challenges by moderating our business plans,
capitalizing on our centralized operating model.
The changes we undertook included accelerating certain promotions
to remain competitive in the highly promotional climate in the third
and fourth quarters. This price optimization approach enabled us to
effectively clear seasonal merchandise and left us with appropriate
levels of inventory as 2008 began.
We also rolled out expense-saving initiatives, utilizing our workforce
management technology to alter our stafﬁng and salary plans across
our stores. In general, we ensured that our selling ﬂoor had ample
Associate coverage during peak shopping times, while reducing our
stafﬁng during less active periods. In addition, SG&A beneﬁted
greatly from lower costs related to pension expense and incentive