According to Walter Loeb of Forbes, J.C. Penney Company, Inc. (NYSE:JCP) has been making reasonably good progress in its turnaround efforts, but it needs to rebuild its decimated sourcing department to complete the comeback. Loeb points out the relatively strong holiday sales numbers for J.C. Penney have slipped in the first quarter of 2014, and the store needs to refocus on its core strength in private labels.

J.C. Penney

J.C. Penney’s sourcing department seriously damaged

Loeb pulls no punches in describing the major error J.C. Penney Company, Inc. (NYSE:JCP) made in scuttling their private labels a few years ago. “Few retailers have ever decimated their sourcing department and trampled on trusted relationships established in foreign countries, especially the Far East, like J.C.Penney did under Ron Johnson.  Mr. Johnson, the hapless CEO who believed he could change J.C.Penney’s mantra by focusing on famous national brands, ignored the unique strength of J.C.Penney private labels.  These private brands registered billions of dollars in sales and represented fashion and value to the J.C.Penney customer.”

Loeb sanguine on Q1 earnings

Although many analysts are expecting a less than stellar Q1 earnings report from J.C. Penney Company, Inc. (NYSE:JCP) on May 19, Loeb says he doesn’t think it will be all that bad. He says inventory levels will in particular be scrutinized, and he expected that the retailer’s inventory numbers will surprise on the upside. Loeb explains his point of view. “I expect the results to be quite satisfactory because of the confidence I have in Ken Mangone, executive vice present of product development, design and sourcing.”

Tight inventory control key to success

Based on his experience with J.C. Penney management and the strength of their experienced design team, Loeb says he thinks the retailer will keep a very close eye on inventory. “While business was weak for J.C.Penney and the industry, I expect tight inventory control to set the company up for a stronger summer and back to school sales period.” He expects the company to take advantage of the fact that new merchandise turnaround time (from order to delivery) is down to around four months in many cases today.