the store and you walked in and you needed a fastener — I mean good luck in the fastener aisle. I saw what happened when we dialed the customer-facing piece of this back too far. So we are not looking to do anything with that other than redeploy the 30% of the non-customer-facing hours.

So still lots of opportunity on the expense side. We are spending close to $1 billion in advertising. There is still opportunity to make that much more effective. As we start to resonate and really connect with these customers, there is much more effective ways to bring them aware of what is going on inside our stores. So I think the team made major, major progress in 2012 addressing expense structure and addressing inventory.

My first week on the job, I asked for a report to look at our out-of-stocks. Would you believe that there wasn’t a report that the Company was looking at to understand out-of-stocks. So do you think anyone was looking at inventory? So we took $575 million of inventory out of the system. And I think we ended the year very, very clean. The sell-throughs that we have seen through the first month here, the ability of getting our product into the store and onto the floor and not having to set in a back room to be then delivered. That inventory management is going to have continued benefit as we go forward. And the aging has been reduced in a big, big way.

We have continued to invest in the infrastructure. We have invested in leadership, both internal to the Company and we’ve brought in a number of people from outside the Company, people that are experts in their field, that will give some of the J.C. Penney Company, Inc. (NYSE:JCP) associates that have been doing really good work for a number of years a much broader perspective around what is possible, giving them true benchmarks to what best-in-class really means.

We are investing in our stores. The $810 million of capital that we invested last year went into a number of stores that hadn’t seen investment for a number of years. So, yes, we transformed 6 million square feet of shop space, but we also invested in lighting, in maintenance and things that had been deferred for a number of years.

And as we talked about on our earnings call a couple weeks ago, we invested in technology to go in. We have been looking at our platforms. We are implementing the Oracle retail platform. We will go live here in a couple months with the financial — the Oracle financial piece of that. And we will use that to then transform a number of our business processes. Most of what we have seen to date in the area of expense reduction has not required a lot of change in processes. So there is still a lot of opportunity as we improve our business process to go after additional opportunities.

And then we talked about what we did to monetize our core/non-core assets and I will remind you that we did retire the debt that came due in August. So we have been able to reduce the long-term debt by about $250 million.

Now let’s talk about our learnings. I think, first and foremost, we have to connect with our customer, with all of them. We have done a number of things inside the store that have allowed us to attract a new customer and in some cases, that has been at the expense of our core and we cannot allow that to happen.

Ron talked at the earnings release about adding back some promotions and providing some coupons, some gifts to those customers if that is what is required for us to compete week in and week out. And we’ve got to do that in a way that doesn’t compromise the long-term vision, doesn’t compromise our ability to go bring in brands like Joe Fresh, to go get the best from Levi’s, the best from Nike, those national brands that have entrusted us with their product such that we won’t devalue it.

So you are going to see on a lot of our private label two things — one, us offering that at a sale and you are going to see some assortment that was edited out that the customer has been screaming loud and clear that’s been missing, you are going to see that coming back in April. So that process started several months ago and you will see those goods landing in April.

So the basic denim, khaki, St. John’s Bay for women, huge, huge miss when we edited that out and didn’t offer an alternative for that customer.

And so they voted with their money and they took it somewhere else. And that is something that we need to address.

We have learned that the customer prefers a sale. Despite the fact that our average unit retail today is lower than it was two years ago, our customers need a reference point and the ability to go home and state how much money they saved. And so we recognize that. We are no longer putting the ticket of the everyday price over the top of the MSRP. We put it below so that people can see the reference. The price is the same, but the customer is telling us they need the ability to go home — and I see it in my household. My wife likes to come home and tell me how much money she saved.

And as I go in explaining to her that no one buys it at the full price, she insisted that she is saving me money. And I think we’ve got to take that into consideration, that desire to have an everyday price and the need for people to show that they are saving money is something that we’ve got to bring together and do it in a way that allows us to continue to achieve the long-term vision for this Company.

We must compete every week. We feel really good about what happens in times of need. Our customers come in to J.C. Penney Company, Inc. (NYSE:JCP) and they purchase what they need. It’s those times during the year last year where we didn’t have anything to offer other than an everyday price that we saw the impact on traffic. And granted, 40% of all of our transactions prior to the transformation were happening with a coupon or a promotion. And in a lot of times, it was 80%. And so you may have gotten an e-mail this morning, Wednesday through Sunday, you can go into our store, print your coupon, it is $10 off a $50 investment. Last weekend, Friday, Saturday, Sunday, we had a blast to all of our e-mail partners, $10 off $10, $10 off $25, asking them to bring in a friend.

And so we hear our customers loud and clear. And we’ve got to do this in a way that allows us to attract that core customer that lost confidence in us and then continue to grow with new customers that are

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