Welcome back to the Deep Dive. I want to start
today by asking you to close your eyes for a
second. Unless you're driving, please don't do
that. But try to conjure up a smell. A smell.
All right, I'm with you. I'm thinking of a mix
of industrial floor wax, the starch on a new
pair of stiff denim jeans, maybe a faint whiff
of popcorn from a kiosk 50 yards away. Ah, and
the air conditioning. You can't forget that distinct
sort of recycled air scent. Yes, exactly. You
are describing the sensory profile of the American
mall. Without a doubt. I am. But specifically,
I'm describing the anchor, the big box at the
end of the hall, the place where you got your
back -to -school clothes, your dad got his work
socks, and maybe, just maybe, your mom got a
portrait taken with a backdrop that looked like
a fake library. We are definitely talking about
JCPenney. We are, of course, talking about JCPenney.
Name that. for better or worse, is practically
tattooed on the psyche of the American middle
class. It really is. And here's the thing. If
you just look at the headlines or just, you know,
the general vibe of retail over the last 20 years,
this company should be dead. It should be a ghost.
Statistically, yes. It should have gone the way
of Montgomery Ward or Sears or any number of
those regional department stores that just couldn't
figure out the Internet. Right. But it's not
dead. It is 2026. And JCPenney is still here.
But the version of it that exists today, I mean,
it's not the store your grandma shopped in. Not
even close. It has morphed into something so
strange, so complex, and so, I think, indicative
of where the global economy is right now. I mean,
as of last year, 2025, it's part of this massive
entity called Catalyst Brands. Which is a sentence
that would have made... Absolutely zero sense
to the founder in 1902. Not a lick of sense.
We're talking about a joint venture involving
Shane, the ultra -fast fashion giant. The algorithm
company that sells clothes. Yes. Authentic Brands
Group and the literal owners of the malls themselves.
It's like a retail Frankenstein's monster. It
is a fascinating mutation for sure. So our mission
today is to figure out how we got here. How does
a company start in a mining town in Wyoming based
on the... literal golden rule from the Bible.
Which is an incredible origin story in itself.
And end up as a property owned asset in a global
conglomerate that is heavily tied to algorithmic
fast fashion. I think to understand that, you
have to look at the arc of the American consumer.
Because JCPenney's history is basically a mirror
held up to the American middle class. That's
a great way to put it. When the middle class
was booming, Penny's was booming. When the middle
class got squeezed, Penny's got squeezed. And
when the middle class started having a major
identity crisis. Well, Penny's hired an Apple
executive and went completely off the rails.
Oh, we are definitely going to spend some time
on the Ron Johnson era. That is a master class
in how to completely alienate your most loyal
customers. It really is. But let's rewind. Let's
go all the way back. Yeah. 1902. The turn of
the century. A different world. We have this
guy, James Cash Penny. And first off, I have
to ask, Cash is his actual middle name. It is.
A bit of destiny there, maybe. He was born in
Hamilton, Missouri. Honestly, he wasn't a guy
who looked like a future retail mogul. He was
a very strictly religious man. Very, very principled.
Right. And the reason he ended up out West wasn't
because he was, you know, chasing gold or glory.
It was because his lungs were bad. The classic
go West for the air prescription from the doctor.
Exactly that. His doctor told him the Missouri
humidity was going to kill him, so he needed
the dry air of Colorado. So he moves, he bounces
around a bit, works a few odd jobs, and eventually
lands a clerk position with these two guys, Thomas
Callahan and Guy Johnson. And their store had
a very memorable name. They owned a chain of
stores called The Golden Rule. Which sounds incredibly
quaint to us now, maybe even a little cheesy.
It does, but you have to understand the context
of retail, especially in the... you know, the
Wild West at the time. It was predatory. Also,
there was no standardized pricing. If you walked
into a store and the clerk thought you looked
like you had money, the price went up. If you
needed credit, the interest rates were frankly.
He was serious. So it was a haggle culture. It
was a haggle culture and very much a buyer beware
culture. Callahan and Johnson ran their store
differently. They had fixed prices. They sold
honest goods. They believed in treating the customer
the way you want to be treated. Hence the golden
rule. Hence the name. And Penny being this deeply
principled guy. He just vibed with that immediately.
It fit his whole worldview. Perfectly. And he
worked harder than anyone else. So in 1902, the
owners make him a proposition. They're opening
a new store in Kemmerer, Wyoming. I looked up
Kemmerer. Even today, it's tiny. In 1902, it
must have been just a mining camp. That's all
it was. It was rough. Coal miners, sheep herders.
Not exactly the fashion capital of the world.
No. But Penny sees an opportunity. He takes his
entire life savings, which wasn't much, and he
takes out a loan to buy a one -third partnership
in this new store. Okay, this partnership detail
is really key, right? This isn't just him being
a manager. He has skin in the game. That is the
secret sauce. That is the whole innovation. Most
chain stores at the time, like Woolworth's, were
centralized. The guy running the local store
was just an employee on a salary. So he might
not care as much. Right. Penny believed that
if the manager actually owned a piece of the
store, they would work harder, they wouldn't
steal, and they would know their customers intimately
because their own livelihood depended on it.
So he opens the doors. It's called the Golden
Rule. It's cash only, no credit. Which was a
huge, huge risk in a mining town where almost
everyone lived on credit until payday. His prices
were lower because he didn't have to cover the
cost of bad debts from other customers. That's
right. And people flocked to it. They made, I
think it was $29 ,000 in the first year. Which
is, what, in today's money, almost a million
dollars? In that ballpark, yeah. It was a massive
success for a tiny store in the middle of nowhere.
So the model works. The model absolutely works.
And as Penny bought out his original partners
in 1907 and started expanding, he kept that golden
rule partnership model. He'd find a bright young
clerk. Usually a man in those days, let's be
honest. Of course. He'd train them up and then
say, okay, you're ready. Go open a store in Utah.
I'll put up two thirds of the money. You put
up one third and you are the partner. It's almost
like a biological cell dividing. It's a franchise
model before franchising was really a thing.
It was viral growth before that term existed.
And the growth was just staggering. By 1912,
there were 34 stores in the Rocky Mountains.
In 1913, they incorporate as the J .C. Penny
Company. And they move the headquarters, right?
Right. First to Salt Lake City in 1909 to be
near the banks and railroads. Then a huge leap
to New York. city in 1914. Why New York? To be
near the manufacturers. It just simplified buying
and shipping. It cut out so many middlemen and
the numbers just explode from there. Give me
the stats. It's vertical. 1917, 175 stores, 1924.
The 500th store opens in Penny's hometown of
Hamilton, Missouri. A nice little homecoming
for him. And then just four years later, 1928,
the 1000th store. A thousand stores in about
25 years. Imagine the logistics of that in the
1920s. No computers, no internet. Just telegraphs
and ledgers and trains. It was a masterpiece
of logistics. Gross business hit $190 million
in 1928. Adjusted for inflation, that's well
over $3 billion. This was a juggernaut. I want
to pause on a detail from the outline that really
blew my mind. There's a connection between J
.C. Penney and another retail empire that comes
much later. Ah, the Sam Walton connection. Yes.
Before Sam Walton founded Walmart, before he
became the richest man in America, he was a Penney
associate. That's right. 1940, Des Moines, Iowa.
Fresh out of college with an economics degree,
a young Sam Walton gets a job as a management
trainee at J .C. Penney for about $75 a month.
Was he any good at it? By all accounts, he was
a terrible clerk. He absolutely hated the paperwork.
His manager said his books were always a mess.
But and this is the Walton part. He was a genius
at selling. He was a people person. He loved
the customers. He would go out on the sidewalk
to bring people in. He could sell anything to
anyone. He just had that charisma. It's fascinating
to think about him walking those aisles, you
know, learning the systems, seeing how a big
retailer operates from the inside. He absorbed
the efficiency. He absorbed the concept of customer
service that Penny's was built on. But he also
saw the inefficiencies. He saw the bureaucracy
that was starting to creep into this now massive
company. So he learned what to do and what not
to do. In a way. Yes. You could argue that Walmart
was built on the lessons Sam Walton learned at
Penny's. He took that golden rule concept of
customer service, stripped away all the department
store frills, and then just weaponized the supply
chain. So JCPenney inadvertently trained the
guy who would eventually become their biggest
nightmare. In a manner of speaking, yes. The
student became the master or maybe the disruptor.
Okay, let's move forward in time. Let's go to
the post -war era, the 1950s and 60s. This is
really when the JCPenney that most of us would
recognize starts to form. The modern era begins
here. The logo becomes iconic. They start doing
national advertising in big magazines like Life.
They issue their first JCPenney credit card in
1959. Which was a huge departure from the cash
-only roots. A massive change. But the biggest
shift of all is in real estate. The mall age.
This is the second great era of the company.
Before this, Penny's was a main street store
you went downtown to shop. But in the late 50s
and early 60s, America moves to the suburbs.
The car culture takes over. The car is king and
retail has to follow the people. So they opened
their first full line shopping center store in
1961 in New Jersey. Audubon, New Jersey. And
that term full line is a piece of industry jargon
we should probably unpack because it meant something
very specific and very important to the consumer.
It basically means they started selling everything,
right? Not just clothes. Literally everything.
Up until this point, Penny's was mostly soft
goods, clothes, shoes, towels, fabrics. But to
be a true mall anchor, they needed to compete
head to head with Sears. The other giant of the
era. And Sears sold the heavy stuff. So Penny's
brought in the heavy stuff. So give me the inventory
list. What are we talking about? Okay, you've
got major appliances, refrigerators, stoves,
washing machines, all private label or through
partnerships with big names like General Electric.
Okay. You've got sporting goods, tools. Lawn
and garden equipment. And cars. I saw a note
about auto centers. Auto centers. This was huge.
You could pull your Ford Country Squire station
wagon into the JCPenney Auto Center, get new
tires, get an oil change, buy a new battery.
And while that was happening, you'd go inside
and buy a suit for church and a new blender for
the kitchen. A one -stop shop for the suburban
family. And firearms. Let's not forget the firearms.
Right. You mentioned this. Up until the mid-'80s,
it was totally normal for department stores like
Penny's and Sears to sell rifles and shotguns.
Absolutely. You could buy a JCPenney -branded
shotgun right next to the socks and underwear.
That is just, it's so hard to process in 2026.
A different world. It was the American general
store concept, scaled up to the size of an aircraft
hangar and dropped in the middle of a sea of
asphalt. They also tried to get into the discount
game around this time, didn't they? I saw something
in our notes about a store called The Treasury.
Right. 1962 is a legendary year in retail history.
It's the year that Walmart, Kmart, and Target
were all founded. All in the same year. Wow.
All in 62. JCPenney saw this wave coming. They
were smart enough to realize that discount was
going to be a huge sector. So they tried to get
in on it by acquiring a small chain and rebranding
it as The Treasury. Why have I never heard of
the Treasury? Because it failed. It struggled
along for about 20 years and they finally shut
it down in the early 80s. So why did it fail
when Target and Walmart became these global behemoths?
I think it's the classic innovator's dilemma.
JCPenney was a department store. They had a certain
cost structure, a certain culture built around
service and presentation. Trying to run a bare
-bones, low -margin discount operation inside
a culture built on, you know, quality and service.
It clashed. It clashed. They couldn't get the
costs down low enough to really compete with
Kmart on price. And they never developed the
cheap chic factor that made Target so successful.
It was the stuck in the middle problem. A theme
that is going to come up again and again with
this company. It's a defining theme of their
entire modern history. Speaking of being stuck
or rather stuck together. Yeah. We have to talk
about the 1964 Alaska earthquake. This story
is incredible. Oh, this is such a defining moment
for the brand's soul, for that golden rule DNA.
So 1964, a massive 9 .2 magnitude earthquake
hits Anchorage. The penny store there is just,
it's wrecked. The building partially collapsed.
I believe one person, an employee, was actually
killed in the collapse. It was a tragedy. The
structural damage was total. So any normal corporation
looking at a spreadsheet would say. They'd say,
OK, take the insurance money. Cut our losses
and leave. It's Alaska. It's expensive to operate
there anyway. But they didn't do that. They did
the opposite. They doubled down. They rebuilt
the store bigger and better than before. And
they did something else. They built a parking
garage attached to it, which was the first public
parking garage in the entire city of Anchorage.
That feels like such a community pillar kind
of move. It's more than just retail. It's solidified
their loyalty in that region for generations.
It wasn't just a store. It was a partner in the
rebuilding of the city. That's the golden rule
in action, but at a corporate scale. That's a
great story. So moving into the 70s, the founder,
James Cash Penny, dies in 1971. He was 95. A
long life. And the company honored him by closing
all the stores for his funeral. It was truly
the end of the patriarch. And it's almost poetic
that the company hits its peak store count right
after he's gone. 1973. 2 ,053 stores. That is
total saturation. You could not go anywhere in
America without being near a penny's. But then,
the 1974 recession hits. The oil crisis. And
the stock gets hammered. It drops by two -thirds.
Yeah. Inflation was rampant. People stopped buying
new refrigerators and new lawnmowers. And the
executives in New York started to look at the
books and say, wait a minute, these hard goods,
the appliances, the auto parts, the paint, they
take up a lot of space, they're expensive to
ship, and the margins are razor thin. Where is
a pair of jeans or a blouse? High margin, easy
to ship, high turnover, takes up way less square
footage. So this crisis forces a reckoning. It
sets up the next big pivot for the company. The
1980s identity crisis. It does. They decide to
stop being the everything store. This was the
1983 shift, a massive strategic gamble. They
spent over a billion dollars remodeling hundreds
of stores to get rid of the automotive centers,
the paint, the hardware, the lawnmowers. They
wanted it to be a fashion destination. They were
saying, we are not Sears. We are something else.
Exactly. We are not a hardware store with clothes.
We are a department store for apparel. And to
prove it, they did something that was considered
absolute heresy in the fashion world at the time.
They signed a deal with Halston. Halston. The
guy who dressed Jackie Kennedy. The guy who was
a fixture at Studio 54 with Andy Warhol and Liza
Minnelli. The king of American high fashion.
The king. And JCPenney, the middle American department
store, signs him to a six -year, $1 billion deal
to create an exclusive line called Halston III.
Today, we see this all the time. Target does
it with designers. Yeah. H &M does it with Versace.
But in 1983. It was nuclear. The high fashion
world was absolutely horrified. They saw it as
Halston cheapening his brand, selling his soul.
Backlash was real. Oh, it was immediate. Vicious.
The high end department store Bergdorf Goodman,
which carried Halston's main couture line, was
so offended that they dropped him. They put out
a statement saying, we cannot sell the same designer
that is being sold at JCPenney. Wow. The snobbery
was just off the charts. It completely destroyed
Halston's high -end business. And the real tragedy
of it all is that the line didn't even work at
Penny's. Why not? Was this stuff ugly? No. By
all accounts, the designs were great. But the
JCPenney customer in 1983 wasn't ready for it.
They walked in looking for sturdy school clothes
and affordable workwear, and here was this slick,
minimalist Halston stuff that felt too fancy,
too expensive, or just. Not for them. It was
a brand disconnect. A total disconnect. And on
the flip side, the wealthy people who wanted
the Halston name were never, ever going to be
caught dead walking into a JCPenney to buy it.
So they alienated the snobs and confused their
regulars. Precisely. The worst of both worlds.
The line was discontinued after just a year.
Halston's career never really recovered. It was
a disaster. But you could argue it was ahead
of its time. That's the huge but in this story.
It was the right idea, just at the wrong time.
Two decades later, Isaac Mizrahi goes to Target
and it's a smash hit. Penny's was visionary,
but they paid the price for being the first one
through the wall. So the big fashion gamble didn't
quite save them. What do they try next? In the
90s, they take a detour that I had honestly completely
forgotten about until I read these notes. Drugstores.
The great diversification. The acquisition spree.
They bought thrift drug. And they bought curd
drug. Phase drug. And then the whale. Eckerd.
In 1996. For a while there, JCPenney was one
of the largest pharmacy operators in the entire
United States. What was the logic behind that?
If they don't buy a dress, they'll definitely
buy their insulin. That's basically it. It was
about demographics and frequency. The department
store business is very cyclical. You shop for
back to school in August, for Christmas in December,
maybe for Easter. A few big trips a year. Right.
But you need toothpaste and prescriptions every
single month. They wanted to smooth out those
revenue bumps. They also looked at the aging
boomer population and thought health care is
the future. It makes sense on a PowerPoint slide.
It does. But execution is everything. Running
a national pharmacy chain is fundamentally different
from running a fashion retailer. The supply chains
are different. The government regulations are
different. The labor models are different. So
management was split. They were distracted. Completely
distracted. The department store started to look
a little shabby and neglected because all the
corporate attention was focused on integrating
these massive drugstore chains. And were the
drugstores even doing well? Not as well as competitors
like Walgreens or CVS, who did only that. They
were masters of that business. So by 2004, Penny's
board realizes we aren't good at this. We've
lost our focus. So they sold it all off. They
sold the Eckerd division to CVS and Rite Aid,
took the cash, and retreated back to the mall.
It feels like they spent 20 years trying to be
something else. A high fashion house, a health
care company, only to come to the conclusion
that they were just a department store. And by
the time they came back to focus on that department
store, the world had changed again. It's the
mid -2000s. Right. The middle class that Penny's
had always relied on was shrinking. Wages were
stagnating. And the competition was just brutal.
You had Walmart and Target eating their lunch
from the bottom. And you had Macy's and Nordstrom
eating it from the top. Penny's was stuck in
that mushy middle again. The most dangerous place
to be in retail. And, of course, the Internet
is starting to become a serious threat. Amazon
is rising. Amazon is on the ascent. But. They
did have one big win in the 2000s, something
that brought a lot of people back into the stores.
Sephora. The Sephora deal in 2006. A huge win.
Absolutely brilliant. They strike a deal to put
Sephora stores within a store. This brought in
a whole new customer. It brought in young women
who probably wouldn't have been caught dead in
the polyester pants section, but they would come
in for Fenty Beauty or Urban Decay. It was an
injection of cool. It gave people a reason to
go to Penny's. It did. And it arguably kept them
alive for another decade. But the board of directors,
you know, they weren't satisfied. The core business
was still struggling. The stock was stagnant.
The store felt dated. They wanted a revolution.
And in 2011, they hired a revolutionary. Or,
maybe more like a Jacobin who brought out the
guillotine. They hired Ron Johnson. The man from
Apple. The man who built the Apple store. The
genius bar. The glass cubes, the sleek, minimalist
aesthetic. He was the golden boy of retail. He
could do no wrong. And the board basically handed
him the keys and said, take this dusty, cluttered
department store and turn it into Apple. He tried.
Oh boy, did he try. He came in with a machete.
He came in and he looked at JCPenney's entire
business model and he just hated it. Specifically,
he hated the coupons. Explain this to me. Because
my most vivid memory of JCPenney. is my mom having
a stack of their coupons the size of a phone
book. That was the drug. That was the entire
business model. JCPenney and most department
stores operated on what's called a high -low
pricing model. Right. They would price a shirt
at, say, $50, but nobody ever paid $50. Then
they would have a sale and mark it down to $30,
and then they would send you a coupon in the
mail for an extra $10 off. So you'd buy this
shirt for $20, and you'd feel like a financial
genius. I saved $30. It's the thrill of the hunt.
It's pure psychology. gamification. Ron Johnson
looked at that and said, this is dishonest. It's
inefficient. It's tacky. He wanted transparent
pricing. He wanted fair and square pricing. That
was the slogan. Just price the shirt at $20 every
day. No coupons, no sales, just the right price
all the time. Which intellectually is sound.
It's logical. It is perfectly logical. And it
was a complete and utter catastrophe. Because
shoppers aren't logical creatures. Shoppers are
emotional creatures. When he took away the coupons,
he took away the dopamine hit of getting a deal.
Customers would walk in, see that same shirt
for $20, and their brain would say, wait. This
shirt is usually marked $50. If it's only $20,
it must be cheap quality. Or they just miss the
feeling of winning. They miss the game. It's
like telling a gambler, we're just going to give
you the mathematical average of your winnings
every week, but you can't pull the slot machine
handle anymore. You take the fun out of it. So
they just stop coming. They stop coming in droves.
Sales plummeted. We're talking a 25 % drop in
revenue in a single year. That is unheard of
for a company of this size. It was a death spiral.
And he was trying to change the store layout,
too, wasn't he? Oh, yeah. He wanted to create
town squares. He wanted little boutiques for
different brands. He wanted coffee bars and hangout
spots. He wanted to get rid of the central checkout
counters and have employees roaming around with
iPads to check you out. Just like the Apple store.
Exactly. But buying a sweater isn't like buying
an iPad. You don't need a genius to explain the
features of a sweater to you. You just want to
find your size, pay, and leave. The customers
were confused. The employees were demoralized.
It was a culture clash of epic proportions. So
how long did he last? It wasn't long. At 17 months,
he was fired in April 2013. But the damage was
done. He had burned through the company's cash
reserves. He had completely alienated the core
customer, that older mom who lived for her coupons.
And once you break a customer's habit, it's very,
very hard to get them back. And while all this
chaos was happening in the physical stores, there
was something shady going on behind the scenes
online, right? The spam dexing scandal. Oh, this
is a legendary cautionary tale for any digital
marketer. In early 2011, the New York Times publishes
this expose. They found that JCPenney's website
was ranking number one on Google for basically
everything. Like what kind of terms? Generic
terms. Dresses, bedding, furniture, skinny jeans.
These are terms that are usually impossible for
one single site to dominate because they're so
competitive. So how are they doing it? They were
cheating. They had hired an SEO firm that was
using black hat techniques. They placed thousands
of paid links to JCPenney .com on completely
unrelated garbage websites. We're talking about
links buried in the text of sites about dog training,
online gambling, obscure music fan pages. And
these links tricked Google's algorithm. They
tricked the algorithm into thinking that JCPenney
was the most authoritative and popular site on
the web for all these topics. Google, they noticed.
Google takes this kind of thing personally. When
the story broke, Google dropped the hammer. They
applied a manual penalty. And overnight, JCPenney
basically disappeared from search results. If
you typed in JCPenney dresses, you couldn't even
find their own website. They were digitally erased?
They were sent to digital Siberia at the exact
moment they needed online sales to save them
from the Ron Johnson disaster in the stores.
It was a brutal one -two punch that really broke
the company's back. So Johnson is fired. They
bring back the old CEO, Mike Ullman, just to
try and stabilize the ship. But from 2015 to
2019, it just feels like a slow bleed. It was.
They were saddled with billions in debt from
the Johnson era. They were closing stores in
waves. They tried these desperate pivots, like
bringing back appliances again in 2016, trying
to target millennials buying homes. How'd that
go? They dumped them again in 2019. It lasted
less than three years. It was just flailing.
They even did a pop -up shop in Manhattan called
Jacques Penn. Please tell me that was a joke.
It was an attempt at self -deprecating humor.
People had been calling it Jacques Pen as a joke
for years to make it sound fancy. So they tried
to lean into it. They had Nicole Richie host
a launch party in Soho. Did it work? It was cute,
I guess, but it didn't solve the fundamental
problem that they had four billion dollars in
debt and nobody was buying their clothes. And
then the ultimate indignity. The stock price
drops below a dollar. December 2018, the penny
stock joke became literal. It was a sign that
Wall Street had given up. Then comes 2020, the
final nail in the coffin, or so we all thought.
COVID -19, the global pandemic. For a retailer
that was already on life support, having to shut
all your doors for months on end should have
been the final fatal blow. Revenue went to zero
overnight. And right before they file for bankruptcy,
there's this headline about executive bonuses
that just looked awful. This made people so furious.
Just days before filing for Chapter 11 bankruptcy
in May 2020, the company paid out nearly $10
million in bonuses to the top executives. The
CEO at the time, Jill Soltow, got $4 .5 million.
While they are furloughing tens of thousands
of store employees with no pay. Exactly. The
corporate logic is that these are retention bonuses.
If the captain jumps ship in the middle of the
storm, the ship sinks faster. You need to pay
the leadership to stay and guide the company
through the complex bankruptcy process so there
is something left on the other side. But the
optics are terrible. The optics are just brutal.
To the average person, it looks like looting
the vault before the building burns down. So
they file. May 15, 2020. They get delisted from
the New York Stock Exchange after 91 years. It
really looks like liquidation is inevitable.
But then... The landlord step in. This is the
most important and strangest part of the modern
story. Simon Property Group and Brookfield Property
Partners. These are the two biggest mall owners
in America. And they buy JCPenney out of bankruptcy.
They do. For about $800 million in cash and debt
assumption. So why? Why would a landlord want
to own a failing department store? Do they just
really love Arizona jeans that much? No. They
love their leases. You have to understand a crucial
piece of real estate law called the co -tenancy
clause. Okay, unpack that for us. In a typical
mall lease, the smaller stores like The Gap or
Bath & Body Works or the Pretzel Stand, they
often have a clause in their contract that says,
if an anchor tenant, which is JCPenney, closes
or leaves, I'm allowed to break my lease or pay
significantly reduced rent. Ah. I see. So if
JCPenney goes dark? It triggers a domino effect,
a death spiral for the mall. If Penny's closes,
the mall owners don't just lose Penny's rent.
They could lose the rent from 50 other stores
or they have to lower everyone's rent drastically.
The value of the mall property itself completely
collapses. So they bought JCPenney not to make
money selling clothes, but to prevent their entire
real estate empire from imploding. It was a defensive
acquisition. They effectively paid $800 million
just to keep the lights on so that the rest of
them all wouldn't die. It's real estate arbitrage
masquerading as retail. That is deeply cynical,
but also kind of brilliant. From a business perspective,
it's genius. And look, it saved nearly 60 ,000
jobs. So it was a good outcome for the workers.
But it fundamentally changed what the company
is. It is now a tenant owned by its landlord.
The incentives are completely different. Which
brings us to the present day of our source material.
The post -bankruptcy era. Right. 2025 and 2026.
The catalyst brands era. This is where the landlords
are getting creative. They realize that just
keeping the lights on isn't a long -term strategy.
They need to actually drive traffic. So they
formed this massive new joint venture called
Catalyst Brands. And this combines JCPenney with
another group called the Spark Group. Exactly.
Spark is another joint venture owned by the same
people that owns the intellectual property for
brands like Forever 21, Aeropostale, Brooks Brothers,
and even Reebok. And the really wildcard partner
in all of this is Shane. The Chinese fast fashion
app, the biggest fashion retailer in the world
by sheer volume. So what's the play here? The
play is Synergy. Sheen is a digital monster,
but they have a physical world problem. Returns
are a nightmare for them, and they have no physical
presence to let people see and touch the product.
And JCPenney has. JCPenney has over 600 huge
boxes with loading docks, parking lots, and existing
staff all across America. I see the vision. JCPenney
becomes the physical interface for the digital
giants. That's it exactly. You walk into a JCPenney
in 2026 and you see a Forever 21 shop in shop.
You see a dedicated return desk for your sheen
haul. You see a Reebok concept shop. The department
store is becoming a brand platform. It's less
about a curated selection by JCPenney buyers
and more about renting out square footage to
whoever has the heat at the moment. It's a logistics
hub with fitting rooms. And in a way, it finally
solves the Ron Johnson problem. You don't need
to make the JCPenney brand itself cool. You just
need to fill it with brands that are cool or
at least popular and use that massive real estate
footprint as a strategic asset. Before we wrap
this all up, I want to touch on the one thing
that has remained weirdly constant through all
this chaos. The private brands. Because when
I think of pennies, I don't really think of Sheen.
I think of St. John's Bay. The unsung heroes.
The private label strategy is arguably why the
stores survived this long in the first place.
They have huge margins because there's no middleman.
I saw in the notes their oldest private brand
is Big Mac Workwear. Launched in 1922, it's over
100 years old, still going. It was created because
suppliers in the early days often wouldn't sell
to them. So Penny said, fine, we'll make our
own. And for my generation, it was the Arizona
jean company. The 90s powerhouse. If you couldn't
afford Levi's or Guess, you wore Arizona. And
you know what? They were good jeans. They really
were. These brands, Worthington for women's workwear,
Stafford for men's suits, Ambriel for lingerie,
they have more brand loyalty than the store itself
sometimes. It's funny. The store keeps changing
its entire corporate identity, but the socks
remain the same. And maybe that's the lesson.
The stuff that's reliable and unglamorous is
what endures. So let's bring it home. We have
traveled from a tiny cash -only store in a Wyoming
mining town in 1902 to a landlord -owned global
brand conglomerate in 2026. What is the big takeaway
here? I think the takeaway is resilience through
mutation. JCPenney survived the Great Depression.
It survived the rise of Walmart. It survived
the retail apocalypse and the death of the mall.
It survived Ron Johnson. It survived a global
pandemic and bankruptcy. It's the cockroach of
American retail. And I mean that with the utmost
respect. It is. But the cost of that survival
was arguably its original soul. The Golden Rule
Partnership model of 1902 was about people. It
was about community managers building a local
business. The Catalyst Brands model of 2026 is
about assets. It's about leveraging square footage
and data and logistics. It feels like the end
of the merchant prince era and the complete triumph
of the asset manager. That is exactly it. James
Cashpenny was a merchant. The people who own
it now are real estate investors. The store no
longer exists to serve the community in the way
he envisioned. It exists to serve the portfolio
of the Real Estate Investment Trust. So here
is the thought I want to leave you with. The
next time you walk into a mall, if you still
do that, and you see that red square JCPenney
logo, Ask yourself, am I walking into a store
or am I just walking into a load -bearing wall
for the global financial system? And if you buy
a pair of socks while you're in there, does it
even matter which one it is? Deep questions for
a department store deep dive. Thanks for unpacking
this with us today. My pleasure. We'll see you
on the next one.