Consumer Confidential: Penney cuts back, Amazon grows, Mickey D's boosting prices
--Some tough times for J.C. Penney. The company is closing some stores, outlets and call center locations, and continuing to work on an exit from its catalog business, in an effort to streamline operations and boost profits. Penney reported in November that its gross profit margin slipped to 39% from 40.6% in the third quarter due to heavy discounting and cutting its big catalog. Penney plans to close six under-performing stores and two call center locations. It's also reorganizing its custom-decorating business, which includes closing a custom- decorating fabrication plant in Sacramento, and shifting to managing 300 decorating studios instead of 525 of its current in-store studios. The company will also close one furniture outlet store in Rancho Cucamonga; it will have two remaining such stores.
--Amazon.com, on the other hand, keeps growing. The online retailer is developing a free weekly home-delivery service that could support its drive to increase online sales of low-priced goods, such as health and beauty items, baby-care products and groceries. Amazon has been testing the service, AmazonTote, in Seattle since last summer and is now recruiting staff for what it describes as a "company-wide" program. The Seattle service offers customers free weekly home delivery, regardless of order value, on a specified day. The goods are delivered to the customer's address in reusable, weatherproof tote bags. By offering free delivery with no minimum purchase price, the service is designed to encourage customers to use Amazon as their main retail destination for regular household purchases. But anyone want to take bets on how long the service will remain free?
--You know the economy is improving when even Mickey D's is ready to raise prices. McDonald's says it will increase menu prices this year to help offset an expected rise in its own costs for the 10 commodities that account for about 75% of its food-preparation costs. Food prices are climbing around the globe, and the world's biggest restaurant chain says its costs are expected to rise this year by as much as 2.5% in the United States and up to 4.5% in Europe. The company's chief financial officer, Pete Bensen, says McDonald's would "raise prices where it makes sense" to offset some, but not all, of the cost increases. In other words, that Happy Meal may get a little less happy.
-- David Lazarus
Photo: J.C. Penney is closing some stores. Credit: Annie Wells / Los Angeles Times