BUSINESS: The Most Powerful Shopper

DRESSED FOR SUCCESS: Under Vanessa Castagna’s leadership, JCPenney’s same-store sales rose 9.5 percent last quarter—the most since 1992.

Vanessa Castagna, the chief executive officer of JCPenney Stores, is trying to sell me a mixer. A KitchenAid Artisan series stand mixer. Ten-speed, 325-watt motor. Five-quart mixing bowl.

“I can give you melon or chartreuse if you want,” says Castagna, ranked by Fortune as one of the country’s 50 most powerful female executives—No. 41, to be exact, second in the Dallas area only to Colleen Barrett, the president and CEO of Southwest Airlines. Castagna and I are in her personal conference room, in the executive suite at the company’s Plano headquarters. She’s standing over me, pointing to a page in JCPenney’s Spring 2004 Cooks catalog. Actually, it feels more like she’s towering over me. The 54-year-old Castagna is an athletic 5-foot-10, whereas I am not.

“Why do you want a mixer?” she asks.

I make bread. Pasta. Pizza dough, mostly.

“Well, there you go,” Castagna says. “We have KitchenAid mixers in 22 colors. No other retailer offers that. We can serve your needs. That’s the whole idea.”

In the fiscal year that ended in January, JCPenney posted $17.79 billion in revenue and $364 million in net income. So the mixer isn’t going to break the company, one way or the other. Yet Castagna is treating it like a million-dollar deal. I am, after all, The Customer. And Castagna says, “The Customer is the focus of everything we do. Everything.”

Vanessa Castagna’s mixer sales pitch is typical for the aggressive executive. She came to JCPenney in 1999 after successful stints at both Federated Department Stores and Wal-Mart. Her arrival preceded by just a few months that of Allen Questrom, the company’s current chairman. Questrom led a sweeping overhaul of the company’s business operations, boosting revenues, profits, and doubling the stock price even as JCPenney shuttered stores and laid off more than 7,000 workers. He also developed a close working relationship with Castagna. She was promoted twice during the most critical phases of the turnaround, landing her current role in 2002.

Another promotion might come soon.

Earlier this year, Castagna’s role took on a greater importance when Questrom cut a pair of deals, worth a total of $4.5 billion, to shed the lagging Eckerd drugstore chain from JCPenney’s portfolio. “With the sale of Eckerd, Vanessa is now pretty much in charge of everything that we do,” says one executive at headquarters. Indeed, Castagna oversees store, catalog, and Internet sales, which, sans Eckerd, will generate nearly every dollar of JCPenney’s fiscal 2004 revenue. Because of that, Castagna has quietly become the front-runner to replace Questrom, whose contract expires in 2005. Castagna would be the first woman to serve atop James Cash Penney’s firm in its 102-year history. If that happens, someone might want to tell the folks at KitchenAid to staff up the factory. They’re going to need the help.

For the record, Castagna won’t discuss the possibility of taking over, and Questrom hasn’t said he plans to leave next year. But if Questrom does step aside, Castagna can mount a compelling case for her promotion.

Consider the numbers. Existing store sales, a measure that declined from the late 1990s until 2001, have been up each of the last three years. The company expects existing store sales will be up again, by 2 percent in 2005. Internet sales have spiked even more dramatically. They increased 50 percent from the 2002 fiscal year to 2003, reaching $617 million. Online sales are projected to hit $1 billion annually by 2006.

Meanwhile, the company, which closed nearly 100 stores in the initial phase of its turnaround, is expanding again. JCPenney plans to open 14 stores this year, the most it has added in the past five years.

All of which, in the words of Merrill Lynch analyst Dan Barry, makes JCPenney the “turnaround of the decade.” (Then again, it’s only 2004.) To be sure, the credit goes to Questrom—a retail savior who rescued Federated from Chapter 11 and brought Barneys back from the brink of bankruptcy before signing on with JCPenney and crafting a five-year plan to salvage the floundering firm. But Castagna’s contribution can’t be overestimated.

One of her toughest tasks was getting all 1,100 store managers marching in the same direction. The managers had always had leeway in picking their offerings. Castagna and Questrom changed that, centralizing JCPenney’s purchasing and distribution. For a century-old company founded by the son of a Baptist preacher who based his business tenets on the teachings of the Good Book, change did not come easily. Many store managers bristled back then.

“She was from the outside,” one current JCPenney executive says. “That’s a big thing around here, because a lot of people come up through the stores and through the culture. She had to earn respect in a different way.”

Today, when asked what that difficult time was like, Castagna pauses before answering. She finds the positive spin: “I think that most store managers saw that they didn’t have the right trends and saw that we were lethargic and slow in getting merchandise to the stores. Everyone knew that we were just not up to snuff. Everyone wanted to make changes, and I think I was the agent of change.”

Essentially, Castagna has played Schwarzkopf to Questrom’s Powell. She was the general on the front lines—albeit a general wearing a chalk-striped sandstone pantsuit. At JCPenney, the clothes might not make the woman, but they do make the store. Her outfit on the day I meet her is businesslike yet feminine. It looks pricey, but doesn’t scream “designer label.” In other words, it’s exactly the kind of outfit that she wants the company’s stores to carry as they reach out to a younger, trendier shopper.

“We’re not your mother’s department store anymore,” she says. The line sounds like it’s gotten a lot of use—though not in conversations like this one. Castagna has rarely been profiled. Several analysts contacted for this story declined comment, saying they didn’t know Castagna well enough to offer any worthwhile thoughts. But if Castagna isn’t the public face investors know, she is certainly a familiar face to the troops. She spends nearly half her time on the road, meeting suppliers, store managers, and catalog center operators. Those are the people who’ve surely heard that JCPenney isn’t their mother’s department store.

You need only watch Castagna sell a stand mixer to understand why she enjoys getting out of the home office. The store environment clearly drives the Muncie, Indiana, native, who graduated from Purdue University in 1971 with a degree in psychology. “I love consumer behavior,” she says. “I love trying to understand why she makes the decisions she makes.”

Excuse me? Who’s “she”?

“The facts show the majority of shoppers are women, and a lot of the decisions come through the female shopper,” Castagna says. “So, around here we just refer to the customer as ’she.’ But I know many men who are great shoppers.”

Which brings us to a question I’ve been mulling since we set up our interview. It might sound sexist, but she brought up the whole “she” thing. So, given that most shoppers are women, does it help to be a female executive when it comes to running a chain of department stores?

“I happen to be female,” she says bluntly. “I happen to be a shopper. Don’t know if it makes a difference or not.”

No, I don’t suppose it does make a difference. Because as we’re talking about the company’s push to carry products that are “timely and on-trend,” I find myself nodding knowingly even though, like a lot of people who work at JCPenney, I’m not a woman. “If pink is the hot color, we want the customer to come to JCPenney and find pink,” Castagna says. “If initials on her handbag are the ’in thing,’ she can come to JCPenney and find handbags with initials.” When we talked, pink was, indeed, the hot color. Even for men. And initials on handbags were also in style, except in New York, where initials were so five minutes ago.

If Castagna wasn’t wild about my gender question, she positively hated the majorette one. At Purdue, Castagna was an award-winning majorette, twirling her baton in competitions all around the world. So I ask: does the majorette enthusiasm translate well to the retail environment?

There’s a pause. A long, uncomfortable pause. It seemed like such a funny question when I thought of it. Majorette? Yes. Woo! But it doesn’t work out that way. Finally, she obliges me with an answer, though she offers it through barely separated teeth.

“Yes, it does,” she says. “And so does my psychology perspective. I’m able to understand people quite a bit.”

Right. I’ll buy the mixer.

Joseph Guinto covered JCPenney in the early 1990s and has profiled former JCPenney CEO W.R. Howell for D Magazine.