Penney forms unit to handle new niche brands

By Reuters
Posted Nov. 11, 2010 at 1:03 p.m.

J.C. Penney Co. has formed a new business unit that will focus on niche brands as it seeks new sources of revenue beyond its namesake department store chain.

The first two projects of the division, Growth Brands, will be launched in partnership with Hearst Magazines next summer.

An online menswear store called Clad will target men age 25 to 54 who favor trendier clothes, while e-commerce site Gifting Grace will cater to women age 30 to 54 and feature gift items.

Clad and Gifting Grace will not carry the J.C. Penney brand, but they will be able to tap the company’s infrastructure, including product sourcing and information technology and logistics.

Penney is facing stiff competition from rivals such as Kohl’s Corp. and Macy’s Inc. and is under pressure to show Wall Street it can grow.

Hedge fund manager William Ackman’s Pershing Square Capital Management and Vornado Realty LP said in October they had taken a combined 26 percent stake in Penney, prompting the retailer to adopt an anti-takeover “poison pill” soon after.

Earlier this year, Chief Executive Myron Ullman told Wall Street analysts that the company’s long-term plan was for total company sales of $23 billion by 2014, up from $18 billion in 2009.

Macy’s and Kohl’s both forecast strong holiday quarter sales this week. Penney is scheduled to report quarterly earnings on Friday.

Penney shares were up 0.8 percent, or 26 cents, to $32.93 in afternoon trading.

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