Can J.C. Penney pick itself up?

Firing CEO Ron Johnson does little to change retailer's bleak outlook. A buyout may be the only hope -- and that's quite a long shot.

By Jonathan Berr Apr 10, 2013 9:33AM
When Ron Johnson was named the CEO of J.C. Penney (JCP) in 2011, investors hoped the head of Apple's phenomenally successful retail business could bring some excitement back to the stodgy department store chain. The company even awarded him a $52.7 million compensation package in hopes of better times to come.

Unfortunately for Penney, Johnson's tenure proved to be exciting for all the wrong reasons.
Johnson tried to do too much too fast. Shoppers reacted angrily to his decision to scrap discount sales and impose a confusing three-tier pricing system, which Penney later ditched, reinstating its old pricing system.

Many people fault Johnson for focusing too much on creating shopping "experiences" and losing sight of what matters most to consumers in uncertain economic times: prices.

Shoppers have fled the chain in droves, and it may be difficult to bring them back. Same-store sales, a key retail metric of locations open at least a year, are down more than 10% in the company's fiscal first quarter.

Shares of Penney fell more than 10% on Tuesday after news of Johnson's ouster came out late Monday. They have plummeted nearly 28% this year. Some analysts, however, see value here. The average 52-week price target on the stock is $15.39, about 8% above where it trades.

The stock is so cheap that it might even attract a buyout. But that may take some time, and it seems likely that the shares will fall further, which is why investors should avoid them.

Penney may not have learned from its mistakes. After all, it has named ex-CEO Myron "Mike" Ullman, who helped recruit Johnson, to replace the executive who proved to be a monumental disappointment. He faces a tough road ahead.

"Ullman inherits a customer base that, in our view, feels it has been betrayed, and he will be virtually powerless to prevent JCP from burning a substantial amount of cash in 2013,"
Reuters quotes PiperJaffray analyst Alex Fuhrman as saying.

That's not situation most investors would want anything to do with.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

More on moneyNOW

47Comments
Apr 10, 2013 10:38AM
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I have a good idea for them, How about being the first large chain store in recent history to have a MADE IN AMERICA SECTION !
Everyone I know would shop there if they sold American made products at a REASONABLE price..
Apr 10, 2013 10:38AM
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Having grown up buying at JCP, I found the changes attractive, but, felt the merchandise all geared

for the 'younger' woman.  Pants below the waist, skimpy tops, etc.  I hope they will cater to ALL

ages again.  JCP has always been #1 to me and hope it will be again.

Apr 10, 2013 10:44AM
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I for one is a regular customer and hope that they bring back the catalogs along with the way things was before he has taken over. Enjoyed looking at the catalogs and ordering on line and to see what is there besides what is in the stores. The Christmas Book was fun to look at especially since I  have grand kids. Glad that he is gone and hope some of the old ways and some of the new can be combined to be the fun store to shop in again.
Apr 10, 2013 10:19AM
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JCP is one of the few remaining AMERICAN retail icons. I support JCP and I hope they return to their original product lines and their original way of doing business( with some tweaks that make them more profitable). Hopefully future CEO contracts will be PERFORMANCE based with the success and protection of the firm as it's # 1 priority.
Apr 10, 2013 10:45AM
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I only go to penneys for work clothes and gifts for my dad. Anything else is walmart due to price. Now Penneys feels like a teenage/ early twenty something place to shop. I never get asked if I need help. I also have trouble finding a sales clerk when I need them. I don't know if this is system wide or just where I live.
Apr 10, 2013 11:12AM
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I hope it can get back to the way it used to be. I worked at JCP for a few years after highschool (1998-2001) and it was such a great place to shop. They used to cater to EVERYONE - old and young alike. It's been sad to see how it's gone downhill.  
Apr 10, 2013 11:29AM
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The JCP store in the upscale mall near where I work used to be first on my list for shopping, but ever since they removed some of my favorite women's brands (St John's Bay, American Living, Cabin Creek, etc) and replaced them with cheap neon-colored clothing meant for 20-somethings, not to mention removing a huge area of retail space in the middle of the women's dept and sticking a Sephora in it's place (even though there is a Sephora in the same mall), I stopped shopping there.  Yes, they have a Liz Claiborne section, but there is a Liz Claiborne store not 5 miles from there.  And I agree with the person who said if they implemented a Made In America section (or any store, for that matter, if they did that), it would help them.  It's very sad how it's become no better than Wal Mart or K Mart.
Apr 10, 2013 11:29AM
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Too little ....too late, I'm afraid.  They should have gotten rid of Johnson six months into it. He took an institution (albeit tired and stodgy...) and ran it into the ground all by himself.

I foresee JCP being sold in the near future.

Good riddance to that idiot, Johnson who thought he was the mesiah......

Apr 10, 2013 11:21AM
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They just don't get it. I was a loyal J.C.Penney shopper for many years. But as the quality of their goods got poorer, their prices seemed to go higher. The selection fell as well. And their timing is "perfect". I got a $10 off on a $50 purchase in the mail. I needed a few things, so thought I would give it a try. Luckily I read the small print. The list of items not included was so long that I stopped reading. And the sale started the day before I got the coupon and ended the day after. Oh, well, back to  Target, Kohl's, Wal-Mart, Bed Bath and Beyond, etc., where  a coupon is a coupon and a sale is a sale. J.C.Penney deserves its slow death.
Apr 10, 2013 10:45AM
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Oddly enough its only because JCP's struggles have been in the news lately that I decided to drop into the one near me and see what all the fuss was about. Boy, am I glad that I did. They have lots of really nice things for dirt cheap prices. They are one of my new favorite places to shop. I hope they manage to stick it out because they have a convert in me.  
Apr 10, 2013 10:35AM
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JCP is a icon in industry and sad to see one person can destroy the business.  Ron J should leave JCP . but his 150M should stay in JCP stock until recover the loss.  JCP should bring back the coupons, and the JCP low pricing that all AMERICAN are accustom to see at JCP

 

Thanks for your stay RON J, do right to JCP leave 1/2 of the millions in stock to show good faith in your plan that did not work.  its not the same sale a product that people need like Apple products those sale by them self.

 

LET GO BACK TO THE AMERICAN BUSINESS by giving sale to the people without raising the product price so high that the regular buyer in JCP know the price is lower yesterday without the sale.

Apr 10, 2013 10:43AM
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I have a JCP in the mall and I always find something to take home. Great prices and great merchandise. I know they will make a come back.

Apr 10, 2013 10:03AM
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I hope that those who have left JCP give them another change. I'm 27 and back in the day, I considered it a dowdy old-lady store.... I never would have considered shopping there. Now, it's one of the first places I go. I really LOVE their new stuff. The Liz Claiborne line, the new JCP line and the Joe Fresh line are awesome. They've brought back some of their coupons and they have their clearance racks still - and you can get a GREAT deal on stuff. The one near me in Manchester, NH has definitely been getting busier since they've made the changes. It's bright, fresh, and affordable. Women my age need to definitely go check it out. :)

Apr 10, 2013 11:02AM
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I have always loved JC Penny; going on 45 yrs of personal shopping experience. But, I have not been to one well over a decade because they are always one of the anchor stores in a mall. I hate malls, I will not go to them. They have also retreated from the more rural areas into cities, leaving most of us unable or unwilling to drive fifty miles for an unpleasant shopping experience. 

 

I know that one can shop online but it is not the same as prowling the store for the great sales they used to have. Also, you cannot tell the quality of a product online. I would much prefer to go to a stand alone store. I know several people who feel the same way. I think the company needs to get back to their roots.  

Apr 10, 2013 12:20PM
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The problem with JCP other then the  fact that they hiring a bad CEO they lost touch with their core customer. What they need to do is go back and start over and remember who are their customers, get to know the customer and what they are looking for, offer them some type of incentive to bring them back to the store. Go back to the Bases.
Apr 10, 2013 12:45PM
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I bought a shirt at JCP and it took longer to pay for it then it did to pick it out.  That made me not want to shop there anymore.
Apr 10, 2013 12:26PM
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I have always loved Penny's for my daughters in the 70's and 80's and now for my grandchildren,,, that is until this latest transition.  They  no longer carry really good merchandise for a good price.  And don't get me started on their women's clothes.  I have complained that their buyers  undoubtedly think we are  all pencil thin or we don't love fashion.  Their larger size womens clothing are horrendous.  They no longer carry Gloria Vanderbilt which is a big disappointment and I hate St. Johns Bay, because they don't fit right.  I am not shaped like a man, I have curves.  Recall the days when Penny's was a place that sold quality merchandise at a good price and had something for everyone.
Apr 10, 2013 12:18PM
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JCP needs to return to the way they were back in the eighties.  They offered quality clothing at reasonable prices.  The whole look and feel of their store now feels cheap.   As a middle aged working woman I can't afford to waste money on poorly made clothing.  I agree with the idea of offering a "made in America section."  American made clothing is definitely superior to clothing made in most other countries. 

Whatever they are planning to do; they'd better act fast.  There are many other retail stores to choose from.


Apr 10, 2013 10:05AM
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Penney's loss of many of it's customer base, including me, was not because of their tinkering with their pricing.  It was solely on account of their nauseating social agenda evident in their print ads.  They can't unring that bell no matter who takes over.
Apr 10, 2013 1:41PM
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The square advertising symbol (?) means nothing, visually.

The JCP weekly circulars will not bring me to the store or web site.

The circular (8/19/12) shows all young people with hideous hair styles (men) and the unshaven look. The clothes and the way they are worn show a complete lack of fashion taste, all aimed at the young shopper. School will be opened shortly, I know. I think your circulars should transcend all age groups since all age groups shop at JCPenney, after all, we all need clothes. I believe Mr. Penney started off that way, didn’t he? It’s strange that the generation that helped build the company are now left behind.

 

JCP made many mistakes over the years, one of which was moving to Texas. New York is the hub of the fashion industry. It was all there, the designers, the manufacturers, the sales people, showrooms for home furnishings, and photographers and studios. JCP severed experienced people from the move to Texas, experienced people that could have started the steam to start the engine so we could hit the ground running. Of course, some selected not to move, there was no incentive.

 

JCP Catalog, a good source of pictorial and factual information for the consumer…discontinued. The JCP web site cannot compete with the defunct publication. The JCP web site does not have the pictorial and illustrious quality of the catalog and it cannot compete with the volume of the catalog. The web site condenses the image to a couple of square inches. Check the JCP web site, under bed & bath, comforters and bedspreads, you find twenty-four photos on one page that are a couple of square inches each. I worked in JCP Catalog for about thirty years as an Art Director in Home Furnishings (bedspreads and drapes, etc.) and I know what it took to produce a photo that was a true representation of the product to the finest detail, color and composition and reflecting a handsome environment. Check the last A or R catalog and you will see what I mean. The computer screen is much too small to fully appreciate the merchandise. How is the return rate?

I believe the discontinuance of catalog was a bad decision. It was nice to pick up and browse through and to know it was always there on the table to stimulate a purchase or to get ideas, etc. instead of turning on a computer and straining one’s eyes on small photos and type.

I understand the problems of production and postage costs. It’s universal, but I would be willing to pay for the spring/summer and fall/winter books.

To sum it up..

Get rid of the SQUARE!

Bring back the BOOK!

 

Respectfully,

Joseph A. Egrie

Former Associate, Senior Art Director Catalog Advertising.    

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