JCPenney’s CEO on what it takes to bring an iconic American brand ‘back to relevance’

Listen to the episode or read the transcript below.

Transcript

Diane Brady: Leadership Next is powered by the folks at Deloitte who, like me, are exploring the changing roles of business leadership and how CEOs are navigating this change.

Welcome to Leadership Next the podcast about the changing rules of business leadership. I’m Diane Brady.

It is back to school season, and some of you may be thinking about JCPenney as a place to shop. JCPenney has been through the wringer from a deeply-discounted department store to a failed experiment at being an aspirational lifestyle brand, if you remember that brief period, to going through bankruptcy and now under CEO Marc Rosen, trying to really play to its strengths as a place where budget-conscious families can buy clothes that they want to wear and not get their groceries at the same time. Rosen believes that doubling down on who they are and who they serve is the key to where they grow from here. Take a listen.

[Interview starts.]

So, Marc, I’m curious, of all the gin joints, if you can refer to a retailer like that, what was it that drew you to JCPenney? I mean, this was a retailer that had gone through bankruptcy. It emerged as a private company. You’ve worked at Levi Strauss, Walmart. What was the clarion call of this one for you?

Marc Rosen: It’s actually an interesting story because I was actually at that point in my career looking at CEO opportunities and somebody who I knew in search called me and I was in New York. I was working at Levi’s at the time. I was in New York visiting with our sales team in New York. And she texted me and she said, I have an opportunity that you need to listen to. And I said, Well, I’m going to have a minute later this afternoon, I’m going to be on my way to Kennedy. And she said, okay, well, are you on the five o’clock to San Francisco? I said, I am. And she replied and she said that, I am, too. She said, We’ll talk on the plane. So I always say that it was sort of…

Brady: Was that your job interview?

Rosen: …meant to be that we ended up on the same flight back from New York to San Francisco. She had been in New York meeting with the ownership team as they were looking for a new CEO. I had been there meeting with my Levi’s sales team. And as we started talking about this opportunity and I looked at the opportunity, what I saw was this amazing opportunity to take what I believe is an iconic American brand, JCPenney—I’ve spent my career working at iconic American brands, whether it’s Walmart, whether it was Levi’s, or now JCPenney—and to take this iconic American brand that really, when you looked at it, had been for a period of time just not invested in and had really not delivered what the consumer needed and to bring the brand back to relevance. And when I looked at the consumer, I saw a group of consumers who is really the core of America. And we say that our customer is America’s diverse working families. And what I looked at it was that group of consumers that was looking for this place to shop where they didn’t have to make the tradeoffs they have to make in their everyday life, where they didn’t have to trade off between accessible fashion, a great shopping experience and finding value. And I did a lot of research on the company. I did a lot of research on the brand. Obviously on the financial position, which we can talk about later, which is a strong position. But also just looking at the brand and saying, how did consumers, what did they think about the brand, how did they feel about the brand? And this is really what attracted me is that everybody we talked to in that research before I took the job said, I got my first credit card at JCPenney. I bought my daughter’s communion dress at JCPenney. I bought the first suit I wore to work at JCPenney. So everybody had a JCPenney story. But every conversation ended with, ‘But I haven’t been there lately.’

Brady: Well, I think that’s interesting because, you went, basically it was late 2021. Let’s go back to this iconic history. You know, I think in the late seventies, it was second to Sears as one of the largest retailers in the U.S., which is why it would be a place where you’d get your first credit card, where you would get, that special dress for your daughter. But now, it’s closer to, I think last I checked, it was around 48th on the list. And obviously the world has changed. Give me some sense as to what the brand means today. You mentioned America’s diverse working families.

Rosen: Right.

Brady: Is it a very different retail promise at this point?

Rosen: I think that when I talk about, again, about relevance and the core reason I came here was to bring this brand back to relevance. And I think relevance has to do with a number of things. I think it has to do with the product assortment that consumers find when they come into our stores and the great brands in accessible fashion. I think it has to do with the shopping experience. And I think the irony you mentioned some of our history is that we were one of the first in catalog retail. We really had all that infrastructure for what then became e-commerce. But we’d fallen behind in that e-commerce shopping experience, and it was bringing that e-commerce shopping experience back to what consumers expected. And it was building all the capabilities so that we could do that. And so when I think about our customer and really what they’re looking for, our customer is, as you said, America’s diverse working families and what that means is our customer is the school teachers who teach our kids, It is the construction workers who are building our homes and offices, and it is the medical workers who are taking care of us and of our families. And so it is that core of America looking at a place where they can find great fashion again at that affordable price and a shopping experience that treats them right. And that’s really what was important.

Brady: Let me reach into your background a bit. Those are people I would also associate with Walmart. Having worked at Walmart yourself, what’s the difference?

Rosen: I think the difference is the experience and the feeling that when you come to JCPenney. So, one of the things I think that people who haven’t been in our stores lately don’t realize is the importance of fashion to our customer. I talk about the daughter’s communion dress or what they’re wearing to a wedding or a family special occasion. Our customer’s looking for what they’re going to wear out, and they are generally more fashion forward and interested in that fashion component of the experience. And they’re also looking for that moment where they can sort of have that special moment and treat themselves to that fashion. I think the difference is this: I think when you walk into other retailers that might sell that and you put the dress that you’re going to wear out on Saturday night in the cart with your milk and eggs, that doesn’t feel like a special experience. When you can come to our store and you can actually go into the beauty department and you could get a mini service of a facial or something like that to take care of yourself. You could go into the salon and have your hair done for the evening, and then you could actually go with your friends and find that dress and try that on and be all set to go for whatever it might be, whether that’s prom, whether that’s homecoming, whether that’s a wedding or whatever family event it might be. I think it’s having that end-to-end experience. And I think there are a lot of different things in our store, like the salon, like beauty, like the photo studio, which a lot of families come in and they do all those things I just talked about, and then they go get a family portrait. And actually, a lot of people say, is that business still growing? And there is this whole nostalgia element of, yes, portrait and family portraits are growing.

Brady: But not a frozen pizza or a jug of milk.

Rosen: Right.

Brady: You draw the limit there. Marc, let me go back and I know we’re talking about this iconic brand. Let’s start with you as a leader, too. I mean, give me a sense of what attracted you to the retail space in the first place.

Rosen: Yeah, I often say that my retail career started out when I was like six years old because my family has been in retail for a long, long time. My grandfather, when he came to the United States with his dad, his dad started a business and they moved to Iowa. So they lived in northern Iowa and they opened two department stores, one in Northwest Iowa and one in southwest Minnesota, and they sold all kinds of goods for families. They sold clothes. They sold things for the home. It was really kind of a predecessor of what a department store has become. And so when I was growing up, I think, you know, for many of us in retail, retail is a 24/7 business, and a 24/7 operation. His store was closed on Sundays, but he still worked on Sundays. And what he did on Sundays was he went and transferred inventory between the two stores. One of the stores had a bigger back room. It was kind of what would be the warehouse or what we now call the distribution center. And if I wanted to spend time with him, I would go with him on Sunday morning to the store. He didn’t have a big fancy replenishment system that had a lot of technology and AI in it. He had a yellow pad and he’d carry it…

Brady: As one did.

Rosen: Exactly right. He had his yellow pad and it listed what was out of stock in the store in Spirit Lake, Iowa. We went to the store in Jackson, Minnesota. We went into the back room. We picked those orders. We loaded them into his car and we drove and put them on the shelves at the other store. And so I say I got into retail at that point when I was six years old, and it’s kind of been in my blood ever since then.

Brady: You know, it’s been interesting to look at your career trajectory. One of the things you did at Levi Strauss was very much, I think of you as the person who pushed them into the e-commerce revolution. What did you learn from that? Because that was not a strength of JCPenney, to your point, when you came over. It sounds easy. Just go online. You know, you came in after the pandemic was full tilt. A lot of people were online. What’s usually missing from that e-commerce experience that maybe the traditional retailer might not get?

Rosen: Yeah, I think if I think back about my experience, I think it was really balancing out both sides of the equation because to really have an e-commerce business that works, there are a lot of fundamentals that need to be in place behind the scenes to make that work, right? A great site experience, whether that’s great search capabilities, great ability to get the items onto the site to show those items. And then you think about the fulfillment capabilities. There’s a lot of base foundation that’s there and you could end up spending a lot of money investing on that. But then I also think it’s about how do you invest in those other things that bring amazing experience to the customer as well? And so it’s really balancing out those things that are kind of forward looking from a merchandising, from a marketing, from a personalization of getting people to the site, with the foundation of running the site. So, you know, I think here at JCPenney, we focused a lot on merchandise and the assortment. We’ve done a lot through merchandise, collaborations, and things like that. When I talk about wearing the dress to homecoming, we just did a collaboration with Johnny Wujek that is all prom and we’re going to do it again in the fall with celebrate dresses. But it’s like, how do you balance that excitement with the foundation? Because the customer really needs both of those.

Brady: You know, it’s interesting as you’re talking about communion dresses and homecoming, it feels very nostalgic. Like I’m thinking about almost a 1950s retail experience what that might have been like. I mean, the history of JCPenney, which we’ve alluded to earlier, when I first encountered it, it was very much of a discount driven brand. You know, it had lots of coupons. You went there with those coupons and you would get great deals. Then Ron Johnson came in from Apple and it had this period of trying to essentially replicate what Apple had done in its stores. We know that didn’t work. Then, I think, it was Marvin Ellison, if I’m not mistaken, and he brought in more of that Sears mentality of appliances and such. So, a lot of clutter you had to deal with. It reemerged as a private company owned by mall operators. So at this juncture, you know, you’ve talked a little bit about it, but let’s start with the fact of does it have to be big to be successful? I mean, there are a lot of diverse working families out there. JCPenney is now about half the size it was. Is getting bigger one of your objectives?

Rosen: Getting bigger for size itself is not necessarily one of our objectives, but I think growing profitably is our objective and delivering shareholder value and growing profitably there so that we are there for the long term of our customers. And delivering that to them I think is really important. So I think it’s really more about value than it is about size for size sake.

Brady: What about in terms of the joy factor of your job? Where do you think you’ve accomplished or what are you most proud of so far in the time that you’ve been at JCPenney?

Rosen: It’s interesting. When I think about the things that I’m most proud of, and I think when a lot of leaders, when we talk about this, it really is about people and it really is about culture and it really is about purpose and belonging and those sorts of things. And so when I came into the company and you talked about it, there was a lot the company had been through and a lot of our teams and associates had been through. And so one of the first things that I did and I did with the team is to really sit down and say, What is our purpose? And I think we all know that people want to come to work and they want the things that they do at work to serve a purpose that’s consistent with who they want to be in their lives. And so when we talked about that, we centered around something that you and I have talked about already in this podcast, which is we are here to serve and celebrate with America’s diverse working families. And I think when we really clarified that purpose and united the team around that purpose, it made it clear what we were doing here. And for our associates that was actually really appealing too because our associates are America’s diverse working families and they saw what we were doing for people like them. And so I think it is when we were able to unite around that purpose and when I think about it from a more substantive [sense of] what our customer can see and I do think our customer sees the purpose come to life, because when they come to our stores, they have a better experience and our store experience and the net promoter scores have gone way up, but our customer is also going to see the results of what is now our billion dollar self-funded reinvestment in the business. It was also then getting the business to a point of stability and I talked about the importance of delivering value and where the business was in a financial position to say we’re going to invest a billion dollars back into this business for the customer and it’s going to be self-funded from what we’re generating.

Brady: What are you doing with that billion dollars? Is it mostly revamping the stores or where is that money going?

Rosen: It’s really going, when I break it down, that billion dollars is going to three areas and it will kind of happen, it started about a little bit over a year ago now, probably about a year and a half ago. So we’re midway through and the first big tranche of investment is really around the shopping experience and so we’ve talked a bit about the shopping experience and the importance of shopping experience to customers, and that means both in-store and online. So by the end of this year, we will have remodeled about a third of our store fleet so that we can provide our customers with the shopping experience they want when they come in store. We’ve also, back to the point we’re talking about with e-commerce, we’ve added a lot of new features and things on the e-commerce shopping experience to make it easier for customers to find what they’re looking for, to show them creative outfitting solutions and how to put things together and how to wear and adding the element of style and fashion to that. And then we’ve improved a lot about our fulfillment capabilities too. So that’s the first tranche is really shopping experience.

The second tranche of investment is around making sure that we have the right assortment, the right merchandise for our customers in the right place. And so there’s been a lot done around our assortment planning tools for merchants, around our inventory planning tools, and so around the way that we’re really planning and buying merchandise and making sure that we have the right product in the right place to serve the customer. And a lot of that has been enabled through investments in technology and AI and things like that. And so shopping experience and making sure that we have the right assortment.

And then the third thing has really been back in the brand. Because we talked some about the health of the brand, but it was really, really important to reinvigorate the brand. And again, we united around that purpose of serving and celebrating with America’s diverse working families. That’s really internal. We also then said, how do we make sure that our customers understand what are the unique reasons that they’re going to come to JCPenney? And we talked about relevance. And it means because they have to have a relevant shopping experience of what’s important to them. And when we looked at our customers, we said what’s really important to them is actually belonging and it’s finding that place where they can find that accessible fashion that’s going to help them belong in whatever moments they’re going to have in their life.

Brady: You’ve talked a little bit about the assortment. Can you unpack that a little more for us? What specifically do your customers look for? What kind of brands resonate, and is that changing the selection of what you have in your stores?

Rosen: Yeah, I think our customer is looking for a combination of great national brands. I think in great fashion and to some extent, you know, we have a set of customers that really does care about the brands, and one of our largest brands is actually my former employee. So Levi’s is one of our biggest brands. Athletic apparel is one place where customers really care about brands, and we’ve seen as we been in back to school, a surge in kids buying branded athletic apparel. So I think that’s really, really important to them. And at the other point, they’re looking for fashion moments and a fashion point of view. And I talked about the importance of our customer really understanding, belonging, and fitting in. And I have two quick stories that I can tell you about that. First of all, I was in one of our stores, I think it was in Ohio, and the store team will regret probably that they let me be alone for a moment in the store. I was walking to the back of the store and a customer came up to me and the customer said, Do you work here? And I had my name badge on so I said, Yes, I do. How can I help you? And he said, I’m going to a wedding this weekend, and I’ve never worn a bow tie before. And so can you tell me how do I tie it and what do I wear it with? And it’s those kinds of fashions…

Brady: Did you know?

Rosen: Well, luckily, by that time, the store team had a panic that I was talking to a customer alone. And so the store manager…

Brady: Undercover boss.

Rosen: …came running up and he helped because I could have helped, but I think much better service would come from the store manager. Another story about that is really for our customer. I met a customer who was going to her first job where she was working in an office and nobody in her family had had an office job and what she wanted to know is what could she wear that would be appropriate for that? So that belonging to a large extent is really about fitting in as families, as our customers, as they go through different things and different experiences in their lives.

[Music starts.]

Brady: Generative AI has been a transformative force in the business landscape for the last 18 months. According to the latest Fortune Deloitte CEO survey, more than half of CEOs are experimenting with generative AI in their own daily activities and, of course, trying to spread it throughout their organizations. I’m joined by Jason Girzadas, the CEO of Deloitte US, which is the long time sponsor of this podcast. Jason, good to see you.

Jason Girzadas: Hi, Diane. It’s great to be with you.

Brady: How are businesses integrating AI into their organizations? Where do you see the most substantial benefits?

Girzadas: I think it’s true, as you say, that every organization wants to capitalize on the benefits of AI, particularly generative AI. The benefits have been largely around efficiencies today and looking for ways to automate routine tasks. The promise is there for more insight-driven use cases and innovation use cases. That’s the next stage. We’re seeing organizations looking to move from proofs of concept and pilots to see these technologies and models put in place in true operational uses at scale.

Brady: When you think about how much change there’s been in the last 18 months, really curious, how do you think it’s going to evolve in the next 18 months, 36 months?

Girzadas: I think we’re actually needing to change our timing horizon. By all indications, we’re more in six month intervals and I think that’s exciting, but also a challenge. Enterprises aren’t accustomed to working in that type of cadence and with that type of pace. And so the winners, if you will, will be those that can assimilate this technology that quickly, which I think is putting real strain on organizations’ ability to adapt quickly. This is a perfect instance where leadership has to be in sync to assimilate technology that quickly. I think as a CEO, it’s important that we lead by example. So I’ve been through all the training. I’ve been through all the productivity tools that we have available within our organization. But then more broadly, we’ve embarked upon a significant investment to deploy this across all we do.

Brady: I’m feeling the urgency. Jason, thanks for joining us.

Girzadas: Well, thank you, Diane.

[Music ends.]

Brady: So, Marc, there’s a lot of words that we often use that can kind of be surrogates for something else. And let’s start with the diverse, diverse and working. Obviously, I understand value. These are people who may be, what is it, $50,000 to $100,000 household income? I don’t know if you put a demographic target on that, but diversity to me implies that also you’re investing in things like language. You’re acknowledging perhaps, ethnic differences in different parts of the country. I mean, what does it mean, diverse working families? It just feels a little bit slightly like a catchall phrase. Can you unpack it a little bit, take it down a level as to what differentiates you from other retailers that are serving diverse working families like, start with diversity.

Rosen: Yep, absolutely. So you started out talking a little bit about income and yes, I mean, our customers have a $75,000 median household income. And I talked a little bit about professions and things like that. And when we did the research, what we saw is our customers are the top three professions are really schoolteachers, construction workers, and medical workers.

Brady: Wow.

Rosen: So that is really the core of America. It’s people who are doing the things that we and our families need to live our daily lives. And then when we looked at diversity in terms of ethnicity and things like that, we do see a disproportionate amount of customers who are people of color, right. So we are disproportionately Hispanic. Our customer is disproportionately Black. And so our customer is by nature of just who they are, in the customer shopping us, disproportionately diverse. And what we want to make sure is that when they come into the store, they’re finding that welcoming environment and that welcoming environment is signs in their native language. So we have a big initiative going on right now to really make sure that we’re serving our Hispanic customers in the way that they need to be served. And that means the signage in the stores, it means having associates who speak Spanish. It even means more of the things that I’ll talk about that relate back to some of the investments we made, like making sure that we have the right size assortment in that store to serve that customer. And so one of the things we found when we went into our stores in a lot of our Hispanic stores, we were actually running out of the smaller sizes of things. And so it was then using those new tools that through the investment we put in place to make sure that we’re getting the right sizes to the right stores based on the ethnicity.

Brady: And the right colors and…

Rosen: Mm hmm.

Brady: Is that because they wear clothes differently or is there particular is it just the kind of, I don’t know, the nature of the demographics of that customer? I mean, well, why would they be going for smaller sizes?

Rosen: I think it’s more about just different body sizes and things like that. And so to a large extent, it isn’t as much about wearing it differently as about having shorter inseams and things like that. So in denim they were looking for shorter inseams. I think we generally in men’s, we’re stopping at a 30-inch inseam and we’ve now put in I think down to 28-inch inseam. So we put in some shorter inseams in those stores. And so it’s things like that that mostly relate to body type. I mean the opposite of that is I was traveling stores a couple of weeks ago and I think it was in North Dakota, and that is not a highly Hispanic, it’s actually a much more Caucasian kind of white region.

Brady: Norwegian.

Rosen: Yeah, exactly. And those stores actually needed larger sizes. Again, just for things relating to body size and body shape and things like that. And so it’s the reality of just getting the right parts of the assortment to the right place for the customer who’s shopping there.

Brady: One thing that you said that shocked me was construction workers being number two. First of all, that strikes me as, here’s my stereotyping into play, but as a largely male profession and I think of JCPenney as a place where were women shop more than men. Can you help construction workers? What do they buy? That’s your number two demographic of all the professions?

Rosen: It is. And I think, you know, obviously, if you look at the world right now, some of the trades are actually becoming much more diverse, much more diverse in terms of who’s actually doing the work, too. And I think we’re seeing in society right now, a lot of those professions are becoming more popular. And so that customer is coming into our store and they may be coming in for two purposes. First of all, they could be coming in for the work wear that they’re going to wear to actually do their job, which could be work boots, it could be heavier work pants and things like that.

Brady: Dickies or Carhartt or something like.

Rosen: Yeah, exactly. That we sell in the store. But it could also be that they’re a construction worker by day, but by night they’re actually having a special moment with their family and they’re coming in to buy whatever they want to wear for that special event. So we see people buying both what we call the everyday essentials, but we also see them buying, if that person is going to come in and buy a suit because they have a wedding to go to because their sister’s getting married the next weekend. And so I think it’s actually that breadth of needs that really serves our customer. Yeah, and I think that means finding it again in a more affordable way. Yeah.

Brady: No, I like that. I think the more you know your customer and obviously, you know, AI comes into play there too, the more you’re better able to serve them. Marc, give us a sense of what’s next. And let’s again look at it through the lens of you as a leader. I mean, you’ve got a fascinating background yourself. I know you were a pianist, you know, when you were in high school. I’ve always been fascinated and had a lot of respect for the fact that you and your wife, I believe, started a synagogue in Bentonville when you were with Walmart. I mean, give me a sense from a personal level as leader of this company what you want to achieve.

Rosen: Yeah, I think it ties back and you talked about some of the things that I’ve done and some of the things that my family has done, and to us, I think giving back to communities has always been a really, really, really important thing. And I think it ties back to probably like for a lot of us, the values that we learned earlier in life. So I talked about my grandfather in the store that he ran, and one of the things I learned from him is caring for the community and giving back to the community. And so his stores were actually in a farming community and he was very aware of when the crops were coming in and if it was a good crop season or not, and if it was back to school time like it is right now, his customers were coming in again, mostly farmers coming in to get clothes for their kids the back to school. He knew when he actually had to say, I’m going to extend some more credit this year because I know times are tough for the customer and I’m going to give back to the community to do that. And so I think a lot of it is about giving back.

And I think that’s one of the reasons when I think to our purpose why the purpose was so important to me, because I do think that when we think about the families that we serve, there are a lot of others in business and in retail who are running away from that customer and saying they want a higher income customer, they want a luxury customer. And the reality is that our customer is actually one of the biggest segments out there. And it’s a tough segment to serve, though, because for our customer, money is tough, times are tough, and like I said, they’re making tradeoffs in everything they do in their life. And so what gives me purpose right now is actually giving them that moment in that place where they don’t have to make those tradeoffs. And then using what we’re generating to really bring back one of our brand pillars of ‘make it count.’

We think about ‘make it count’, which is our brand value proposition that I talked about. The important pillars of that are: it’s accessible fashion, it’s a rewarding shopping experience, it’s giving back to communities. And what we do to give back to communities is really, really in a large part, a local effort to our stores to give back to communities. But there are other things that we’re doing right now, like we’re giving a 35% off to schoolteachers because they are one of our biggest professions and right now they’re going to buy clothes for their back to school. And again, it’s making tradeoffs for what they can do in that family. So that giving back to communities is very important. And then the fourth pillar of our brand is, really came from James Cash Penney, our founder, is really the golden rule, which is serving others like we want to be served. And so I think what was really important to me is the values and the purpose and the giving back to community, which is really consistent and important to who I am and who my family is and my view of the world.

Brady: Great. I look forward to what’s next. Is there anything around the corner that even hints of things to come that you’d like to put on our radar to watch for?

Rosen: Yeah, I think as we think about the transformation that we’re in, I talked about a lot of the things that we’ve done in terms of store remodels and technology and the customer shopping experience and really the next phase, we rolled out the rewards program in the spring, but the next phase is continuing to really reinvigorate the brand. And as we look to holiday again, we think this holiday, value—as it has been through back to school and that has been for a period of time—value is so important to the customer and really even more important. And so you are going to see us do some exciting things with the brand during the holiday season in terms of bringing value back into customers and offering some deals and some things that really bring people to understand the things that only JCPenney can do. And I think there are so many things that only this brand can do, and I’m just excited to continue rolling those out and continue to serve our customer.

Brady: Well if there’s one thing that unites us, it’s that we all love a good holiday.

Rosen: And we all love a good deal too.

Brady: So thanks very much for joining us, Marc.

Rosen: It was great to chat with you. Thanks, Diane.

Brady: Leadership Next is edited by Nicole Vergalla. Our audio engineer is Natasha Ortiz. Our producer is Mason Cohn, and our executive producer is Hallie Steiner. Our theme is by Jason Snell. Leadership Next is a production of Fortune Media.

Leadership Next episodes are produced by Fortune’s editorial team. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.