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Determining the Facts


Reading 2: Meet James Cash Penney

When I went to Kemmerer in 1902, I had no idea that (in 1921) we would have 313 stores...but that didn't prevent me from doing my best and working with all my might. Do unto others as you would have them do unto you. --James Cash Penney

James Cash Penney was born September 16, 1875, to Mary Paxton and James Cash Penney, Sr., on a farm near Hamilton, Missouri. Shortly after his son's birth, the elder Penney, who combined occupations of stock farmer, Primitive Baptist preacher, and politician, moved his family to town so that his children could attend school. Although Penney's father was a figure of some consequence in the community, he was constantly short of cash. When Jim, as he was called, was eight, his father told him he would be responsible for purchasing his own clothing. Over the next few years, young Penney worked on surrounding farms, raising pigs, trading horses, and growing watermelons.

In 1895, two years after his high school graduation, Penney discovered what would prove to be his life's calling when he began working part-time as a sales clerk at a general store in Hamilton. He worked extremely hard and proved himself so adept at merchandising that he advanced rapidly. Although his first year's salary was only $25, by 1897, he was making $300 a year, and his future appeared bright. Then he was given shattering news; his family doctor diagnosed Penney's recurring health problems as the early stages of tuberculosis, and said that unless he moved to a dryer climate, he would likely die.

In June 1897, Penney went west in search of health and fortune. After working briefly in Denver as a dry goods clerk, he moved to Longmont, Colorado, where he bought a butcher shop. That business failed, however, reportedly because Penney refused to furnish free liquor to the chef of the local hotel, his largest client. Penney decided to return to the dry goods business, taking temporary employment as a clerk in Callahan and Johnson's store in Longmont. Early in 1899, the owners offered Penney a permanent clerkship in their Evanston, Wyoming, store at a monthly salary of $50. He readily accepted. He did so well that a few years later, when he was 26, the owners offered to make him a partner in a new store they planned to open in 1902. Although they had intended to locate the store in Ogden, Utah, Penney objected on the grounds that Ogden was too large. He proposed that a smaller town like Kemmerer, Wyoming, would be better. Kemmerer was a mining town with about 1,000 residents and a company store that operated on credit. Penney opened the Kemmerer store on April 14, 1902. He used his $500 savings and borrowed the rest of the $2000 necessary to become a one-third partner in the venture.

Penney called his store the "Golden Rule," because his idea was "to make money and build business through serving the community with fair and honest value."1 Many in Kemmerer thought Penney's business would fail. The local bank cashier strongly advised Penney against opening a "cash only" store because three other merchants had failed to compete successfully with the stores of the mining companies, which offered credit. Convinced that hard work could bring success, however, Penney and his partners decided to go ahead with the Kemmerer store.

Business was brisk on opening day, and Penney brought in an impressive $466.59. By the end of the year, he had sold $28,898.11 worth of goods and showed a substantial profit. His store carried men's, women's and children's clothing, shoes, notions, and fabric for sewing. Penney increased his profits each year. In 1907 he bought out Callahan and Johnson and became sole owner of the Kemmerer store. In the same year he purchased two additional stores in Rock Springs and Cumberland, Wyoming.

Several things made Penney's success possible. His stores were all located in inexpensive locations in small communities. He did not pay for elaborate fixtures and displays. He conducted business on a cash-only basis and treated his employees well. Perhaps most importantly, he carried merchandise that his customers wanted, ensuring a rapid inventory turnover. When one of his store managers had saved enough money, Penney would help him open a new store as part owner. The manager was responsible for investing one-third the amount necessary and Penney provided the remaining two-thirds. The manager agreed to train someone to take his place at the existing store. In turn, the new manager would train others until they started up their own stores as one-third partners. This arrangement allowed for rapid expansion in the early years of the business.

By 1909, Penney moved away from Kemmerer, leaving the store there to an associate. He went to Salt Lake City, Utah, approximately 125 miles southwest of Kemmerer, where he established the headquarters for the growing chain and consolidated his buying and accounting operations. Over the next three years he established 28 new stores in Utah, Idaho, Nevada, Oregon, Washington, and Colorado. In 1913, Penney and his many partners incorporated the firm in Utah as J. C. Penney and Company, Inc. He had decided to abandon the name "Golden Rule," which had been adopted by some of his less scrupulous competitors. Not long after the business was incorporated, Penney moved the firm's headquarters to New York City where he would be closer to his major suppliers of merchandise.

Expansion became a regular program for Penney. Between 1920 and 1930, more than 1,250 new stores opened, most of them on Main Streets in small towns across America. Even the Great Depression did little to halt the Penney expansion program. By 1932, the number of stores had increased to 1,473. Although seven stores had to be closed in 1933, the company's total profits were almost double those of 1932. Penney himself was not so fortunate. Through bad investments in Florida real estate and banking, he lost almost his entire fortune of $40 million. He met that crisis by going back to work full time for the company, and eventually he recouped most of his losses. When the day of modern shopping centers arrived in the late 1950s, Penney's chain was so strong financially that it succeeded in suburbia too. By the 1960s, the company abandoned its cash-only policy by adopting its own credit cards and updating its merchandise (much of it manufactured under the Penney label). The company also opened its own catalog business.

Penney served the company as chairman of the board until 1958 and as a director until his death in New York City on February 12, 1971. When the business celebrated its 90th anniversary in Kemmerer in 1992, 21 years after Penney's death, it had become a firm surpassing $15 billion in sales, and employing approximately 190,000 associates with more than l,300 stores scattered throughout the U. S. and Puerto Rico. This large national retail business continues to reflect the hard work and vision of James Cash Penney.

Questions for Reading 2

1. What experiences did Penney have in his early life that helped him to become a successful businessman?

2. Why did Penney choose to open a store in Kemmerer, Wyoming?

3. Why do you think Penney's first store was so successful?

4. How was Penney able to rapidly expand his chain of stores?

5. How did the company change to meet competitive challenges that arose in the 1950s and 1960s?

Reading 2 was adapted from Ralph J. Christian, "J. C. Penney Historic District" (Lincoln County, Wyoming) National Historic Landmark Nomination Form, U. S. Department of the Interior, National Park Service, 1977; and information from the J.C. Penney Archives in Dallas, Texas.

¹J.C. Penney, Fifty Years with the Golden Rule (New York: Harper & Brothers, Publishers, 1950) 55.

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