Ullman: Why the recession is good

NEW YORK -- This holiday season, J.C. Penney chairman and chief executive officer Myron E. Ullman III is armed with a lineup of exclusive fashion brands he helped bring to the department store chain, and he's ready to battle key rivals such as Macy's.

During more than two decades in retailing, Ullman has seen a slew of competitors go out of business and, as Macy's CEO in the early 1990s, even succumbed to a hostile takeover bid from Federated Department Stores.

But he said nothing presented the kinds of challenges that Penney and other stores face now. He thinks this recession has made consumers permanently more frugal.

Always an optimist, he said this plays to Penney's strength, however, because the moderately priced chain offers a stylish alternative to higher-priced rivals. Under his stewardship since December 2004, Penney has moved from offering mainly store brands to filling its floors with trendy Sephora cosmetics shops and affordable lines from designers such as Nicole Miller.

This fall saw the arrival of "Cindy Crawford Style," a home furnishing and accessories collection exclusive to Penney, and JOE Joseph Abboud, an exclusive collection of men's sportswear and tailored clothing. And the company announced it will be the sole U.S. store selling all the Liz Claiborne lines, except for the Isaac Mizrahi-designed Liz Claiborne New York brand.

As many other retailers have closed stores or laid off workers in response to the downturn, Penney has kept investing, most notably opening its first Manhattan store in July.

Ullman, the eldest of seven children, said his father, Myron E. Ullman II -- an industrial engineer who invented a modern version of the dishwasher in the late 1950s -- taught him to innovate.

A neuromuscular condition that requires Ullman, 62, to get around by scooter hasn't slowed him. He said he's devoted to his wife, Cathy, their four sons and the two daughters, now 24 and 15, they adopted in 1988 and 1997 from Hong Kong, and he's done charity work for years.

He helped found an orphanage

in Hong Kong more than 20 years ago and for eight years has led the board of Mercy Ships International, a global medical and service charity.

Here are some excerpts from an interview with Ullman.

Question: What has it been like to navigate the biggest consumer spending downturn in decades?

Answer: It is an especially important time to be clear in our communications, in how we are going to focus our efforts. We made a conscious decision to moderate some of our behavior: expenses, capital, inventories. We wanted to maintain our focus on some of our key principles like our key brands. And we actually wanted to accelerate our investments in some categories, like Sephora and customer service, rather just saying it's going to be a tough economy and everything is going to change.

Q: How have your consumers' habits changed?

A: We are dealing with a middle-income consumer (who) has been the one with the most changes in terms of discretionary behavior. The bottom quartile is very focused on the daily needs. The top quartile has resources and is not concerned about the day-to-day things.

There is this new normal. People are going to be very pragmatic. That plays to our strengths and it just encourages us to be sharper on prices.

Q: How prepared do you feel about the holiday shopping season?

A: A year ago, we had way too much inventory so our primary issue was how we were going to get rid of this stuff. This year, we have our inventory invested in key categories. We are much better positioned to take care of the customer on the things that we think they are going to want for Christmas.

We are encouraged by the fashion they were buying (in October). Wool coats sold very well, and women's apparel is the leading category.

Q: Analysts say the line between Macy's and Penney is blurring as you add more big-name brands. With your new store just a few blocks away from Macy's flagship in Manhattan, that battle appears to be even more heated.

A: I have a lot of friends at Macy's. I think they have got some challenging issues of their own in terms of their merger with the May Co. They need to focus on their business (but) I am going to focus on taking as much of their business away as possible. That's my job. It obviously has made them sharper by having us across the street. That's the way it works in retail: There's no place to hide.

Q: How did you get into retailing?

A: I went to work for IBM for seven years. I handled the Procter & Gamble account for IBM worldwide. Then I went to the University of Cincinnati as the vice president of business (affairs). Then I was a White House fellow. Then I decided to go back and look (up) the accounts I had at IBM -- Federated, Kroger, and P&G. Federated offered me an opportunity at Sanger-Harris (department store) in Dallas. The opportunity was basically to learn retailing from the ground up.

Q: How do you strike a balance in your life? What have been some of your personal experiences that have shaped you as a leader?

A: I had four natural boys and adopted two (daughters) from Hong Kong. Both were handicapped. What influenced my life was watching those four boys taking care of the two girls. It was a strange addition. I had my own health challenges. Those are things that everybody copes with. As you develop as a leader, having a balance of what you give back and what you take is important.