JCPenney slashes prices in dramatic overhaul

The retailer will also carve its stores into mini-shops featuring individual brands.

By Kim Peterson Jan 25, 2012 1:21PM
JCPenney (JCP) is permanently slashing all of its prices by at least 40% in a sweeping overhaul of its stores and strategy.

The company says it's unhappy with its old model, which confused shoppers with nearly 600 promotions a year. It had too many sales that didn't draw in customers, and in the end, most of its revenue came from items marked down at least 50%.

That's not the right way to do business, the company said. So it has announced a new pricing strategy that aims to be simpler and easier to understand.

Post continues below.
Here are the new tiers of prices, starting Feb. 1:
  • Daily low prices. This is similar to the "everyday low pricing" model that Wal-Mart (WMT) made famous.
  • Monthly discounts. There will now only be 12 promotional events each year -- one a month -- when some items will be marked down further.
  • Clearance deals. JCPenney is timing its "Best Prices" clearance sales to the first and third Friday of the month -- when many shoppers get paid.
The thinking behind the strategy goes something like this: Don't try to trick customers with prices that change all the time. Customers will simply wait on a purchase if they think another sale or deep discount is around the corner. Instead, keep prices constant and reliably low.

"The customer knows the right price," CEO Ron Johnson said Wednesday, according to Reuters. "To think you can fool a customer is kind of crazy."

Investors didn't seem too impressed by the news. JCPenney shares fell 1.3% to $34.15 after the announcement.

JCPenney has other big changes in mind. It's doing away with what it calls "the confusing and seemingly endless racks" in traditional department stores. Instead, JCPenney plans to carve its stores into dozens of mini-shops based on individual brands. There will be a Martha Stewart shop, for example, along with separate shops for Izod, Liz Claiborne and L'amour Nanette Lepore.

Target (TGT) is also exploring this idea of a shop within a store, announcing recently that it will feature small Apple stores in some of its large stores around the country.

These moves try to make a store more distinctive, with a landscape more customized to shoppers' needs.

JCPenney is also launching a new advertising campaign featuring talk-show host Ellen Degeneres, who began working for JCPenney in her teens as a sales associate. It gave a peek into that campaign Wednesday with a full-page advertisement in The Wall Street Journal that said: "We're not interested in being the biggest store or the flashiest store. We want to be your favorite store."

The retail industry has been expecting something big from JCPenney ever since the company hired Johnson away from Apple (AAPL) to serve as CEO. Johnson helped lead Apple's retail store expansion -- a strategy that some critics said would fail but one that became crucial to Apple's enormous success.

"We are redefining the JCpenney brand so we become a store for all Americans, by offering an experience they cannot get anywhere else," president Michael Francis said. "This will start by freeing consumers from the barrage of promotions and undifferentiated shopping experiences they have become used to and replacing it with something entirely fresh and new that is evident in every aspect of our store -- new brands, new marketing, unique attractions, and much more."


Jan 25, 2012 1:51PM

"JCPenney plans to carve its stores into dozens of mini-shops based on individual brands. There will be a Martha Stewart shop, for example, along with separate shops for Izod, Liz Claiborne and L'amour Nanette Lepore."


Am I the only person who hates this?. This is why I never shop at Macy's. If I want a pair of black pants, I have to look in 5 different departments until I find what I want. Keep similar items together and don't make me wade through 5 departments to find something.

Jan 25, 2012 2:21PM
I worked at JC Penney as a young woman in the early '70s; the main philosophy of founder John Cash Penney was, in my opinion to provide one-stop for the average working family, including a sporting goods and tools department.. They lost that idea when  they tried to make the store on a par with Nordstrom's. I haven't worked or shopped there in decades. It was a nice place to work and shop; I have no axe to grind with them. Hopefully they will return to this business plan in this distressed economy. All the luck to them and us. The stores need to bring back MADE IN USA. That's the only way we'll all survive long-term.
Jan 25, 2012 2:10PM
Hooray for J.C.Penny, But the biggest change, the prices. But please, bring products,  MADE IN THE U.S.A.     The last time I shopped in your store was in December, and I only found one blouse, made in the U.S A.  So I left. So it is not only the prices.  Good luck, because I love to shop at J.C. Penny.
Jan 25, 2012 1:57PM

in addition to prices jcp need to revamp their merchandise selection and how about more made in the USA merchandise?

Jan 25, 2012 1:38PM
No bargains anymore, all foreign crap we need American goods and services without union fraud involved, then average Americans will by here
Jan 25, 2012 2:47PM
I've been saying this for over a year now.  Every survey I take online I complain about the excessively inflated prices just so they can advertise a 50% off sale and still sell it for more than the price should be.  We consumers are not stupid.  I also am outraged by the waste of paper used for all those "biggest sale ever" flyers I receive in my mailbox and newspaper each week.  Thank you for seeing the light and realizing the intelligence and needs of your customers.  I can only hope that Kohls and others follow in your footsteps.
Jan 25, 2012 1:59PM
It's about time... Kohls is VERY guilty of this.... why do they bother putting out an ad every week.  It's the same prices every week.
Jan 25, 2012 3:08PM
Some of their stuff is good,Arizona,St Johns Bay etc.if you buy off season you can make a killing.Big and Tall prices are reasonable compared to some catalog retailers. Poor quality is often seen at poor ol' Sears? who is the buyer for that outfit?Sarcastic--------I hope Penneys makes a comeback.
Jan 25, 2012 1:37PM
Kohl's is having JCP for lunch.  Good thing they finally realized this and will attempt to do something about it.  Good God, I get a JCP flyer in the mail EVERYDAY!!!!  Please, save the postage.
Jan 25, 2012 2:21PM
As long as JCP don't get the Walmart crappy clothes, then I'm alright with it, JCP is my favorite store. 
Jan 25, 2012 3:25PM
I hope this works for Pennys.  Anything that helps break the stranglehold Walmart has in this country is a good thing.
Jan 25, 2012 3:31PM
I shop a lot at JC Penney's but have noticed lately that their quality isn't as good as it used to be. Hope this helps and I hope they will start getting better quality as well. I do have to say their sales associates are some of the best I've come into contact with. Always friendly, helpful and courteous.
Jan 25, 2012 2:34PM
I agree with those who want more items made in the USA. Great point!
Jan 25, 2012 2:19PM
Amazing!  All the retailers "discount" their prices by running "specials" "sales" and any other gimics they paying marketing geniuses to come up with.  Bottom line - when goods come from China, who in their right mind would pay top dollar?  i.e., Coach, Ralph Lauren, Michael Kors, blah, blah, blah................​............. 
Jan 25, 2012 3:12PM
Retail stores whether it be JCPenney's, Macy's, Kohls, etc. put a "suggested retail price" on all their items followed by a "sale price" to make you think you are getting a bargain.  Let's say you see a sweater in one of these stores so they will tag it as msrp $60 & then follow it with a sale price of $14.99.  The consumer thinks they are getting a bargain at $14.99 when in fact that is about a 100% gross margin (the cost of the sweater is probably $6-7) made on that item by the retailer.  With the exception of a few very savvy consumers most people fall for this trick that has been going on for years.  It's a big marketing scheme just like the "bait & switch" tactic many stores still use.
Jan 25, 2012 2:19PM
I agree with Mama Mia.  I absolutely HATE the idea of individual shops within the store.  JCP is already divided into enough shops.  I like it the way it is set up now.  I can easily find what I want without checking multiple "shops" around the store.  I love the idea of less "sales" but slashed prices.  Two-thirds of my mail is thrown away anyway. 
Jan 25, 2012 2:18PM
I personally would rather see better buyers for JCP.  I shop plus size and most everything is for the grandma's.  Yuck!  Our store went through this whole remodel and I was excited for a few months until they kept decreasing the amount of hip, young clothes.  I guess I'll have to wait to shop at JCP until I am a grandma!
Jan 25, 2012 3:46PM

I love JC Penny's and I hate hate hate Kohl's! It would be nice if they try to get clothes made in America! Does anyone remember the union label. We need to get back to hiring from our own Country. It would be nice to buy an outfit made here in the good ole USofA!

Just sayin!

Jan 25, 2012 3:25PM
I hate stores that do that, another one is Kohl's, they overprice products just to then have them perpetually "on sale".  Total crap!  Glad JcPenny is doing away with that, I might actually make an effort to shop there.
Jan 25, 2012 2:14PM
JCP needed to change their 'buy one get one 50% off' sales. Most of what I need is one item at a time. Who needs two packages of crew socks? Need to replace a blue dress shirt? I would just go to Macys or somewhere else with a sale on the one shirt I needed. How about showing an item on sale in a flyer and then being told at the store it was a different item that is on sale. I'll wait and see what happens with JCP but I hope they become better priced as there are a few items they sell that I prefer.
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