Peterson Milla Hooks, the Minneapolis ad agency that helped Target Corp. rebrand its image as it became the $67 billion retailer it is today, is now being asked to help do the same for struggling J.C. Penney Co. Inc.

The agency and J.C. Penney confirmed last week that Peterson Milla Hooks, also known as PMH, will join Saatchi & Saatchi as the department store's creative partners.

It's a potentially big move for PMH, which parted ways with Target earlier this year after it landed the apparel and home divisions of discount retailer Kmart.

But it's no surprise.

Penneys' president is Michael Francis, who was Target's chief marketing officer during PMH's successful ride with the Minneapolis-based retailer. Francis, a widely respected marketer, left Target in October to become president of J.C. Penney. He helped establish Target's reputation as a trendsetting designer for the masses, and PMH helped him do it.

In a relationship that went back to the late 1990s, PMH created Target's now-distinctive bull's-eye logo. It also created the "Sign of the times" campaign that featured 1960s pop singer Petula Clark. The agency's last assignment for Target was the almost-too-successful launch of the Missoni line of designer fashions and accessories in September.

"They have a good reputation," said Doug Spong, president of the Minneapolis ad agency Carmichael Lynch. "Their Target work was very, very strong."

Spong said it is not unusual for a company executive to reach out for a familiar ad agency after changing jobs.

"It happens all the time," Spong said, noting Carmichael Lynch shifted work from Porsche North America to Subaru when Porsche's chief marketing officer went to Subaru in 2007. "As they move around, they forge pretty strong loyalties with agencies."

In addition to Penneys and Kmart, PMH's client roster includes Gap Inc.'s Athleta brand, OshKosh B'Gosh and Children's Hospitals and Clinics of Minnesota.

PMH and Penneys declined to comment in detail about their new alliance.

But there are challenges for Penneys in a very competitive environment.

"Penneys is a brand in search of a meaning," Spong said. "Penneys is a 'tweener. They're between Wal-Mart and Target and Neiman Marcus."

Earlier this month, J.C. Penney reported a third-quarter loss of $143 million compared with a profit of $44 million a year earlier. The Plano, Texas-based retailer also said same-store sales would be flat to slightly up in the important fourth-quarter holiday sales period.

Executive Chairman Myron Ullman III attributed the revenue decline to "limited discretionary spending" by its "moderate customer."

Target, meanwhile, reported a 3.7 percent increase in third-quarter profits to $555 million and a 4.3 percent increase in sales at stores open more than a year. And Target CEO Gregg Steinhafel told analysts Wednesday in a conference call he was optimistic about the holiday season.

They know each other

"J.C. Penney isn't Target," retail expert Dave Brennan said of the challenges facing PMH. "But they [PMH] know branding and retail, so they have a leg up. And they have worked with Francis before, and he with them, so both know what each offers idea-, goal- and process-wise."

Brennan, co-director of the Institute for Retail Excellence at the University of St. Thomas, said J.C. Penney's task is to differentiate itself from its competitors.

"They are trying to move up the ladder at the same time Macy's has repositioned themselves down closer to the area where J.C. Penney has been," Brennan said. "One of the key challenges is creating excitement around the brand while they are going through the repositioning."

PMH, with a staff of 50, was founded by Campbell Mithun alum Dave Peterson more than two decades ago.

There is some speculation in the advertising world whether the agency can represent both J.C. Penney and Kmart or if those relationships create a conflict of interest.

However, it can be argued that the customers who shop at each retailer are dissimilar, with Kmart attracting a discount-oriented clientele while Penneys offers a department store experience.

"PMH will bring Penneys to life," said Spong. "Francis is good. He will surround himself with people who carried the water for him at Target."

David Phelps • 612-673-7269