6/5/2012 6:29 PM ET|
Is JC Penney the next Sears?
2. Is the new management doing too much, too fast?
You bet, and this is the problem. Major overhauls at retailers are tough. And the new bosses at J.C. Penney are changing a lot. Everything from product -- they're putting fewer choices on shelves and bringing in more upscale brands -- to pricing, store layouts, information management systems and staffing levels.
Major makeovers are even tougher when you try to do them quickly. "They are tearing apart the entire company all at once," says Davidowitz. "I'm not saying their ideas are wrong. I'm saying the way they are doing this will lead to a complete unraveling of the company. It's going to be a mess. It typically takes years to make all those changes."
But even at a slow pace, total retail makeovers can fail badly. Back in 2007, new managers tried to overhaul the retailer Talbots (TLB) with a plan quite similar to the one for J.C. Penney now, points out Charles Grom, an analyst with Deutsche Bank. Bad move. Talbots stock fell from about $25 in early 2007, to about $2.40 now.
3. Will JC Penney customers trek to the stores without coupons?
Maybe not. And this is a big issue.
Last fall, Penney boldly announced plans to ditch coupons and most sales in favor of regular, monthlong sales on some seasonal items and some Friday clearance sales. Everything else is offered at "Fair and Square Every Day" prices. So far, that has changed only slightly.
Two big problems here.
First, shoppers love their coupons. Macy's (M) learned this six years ago when it cut back on coupons after buying May Department Stores. It reversed the decision after sales fell sharply. Nowadays, coupons are even more important than back when the economy was booming. "We are living in a world where family income is down 10% in the last four years," says Davidowitz. Morgan Stanley surveys confirm that coupons were the top reason customers shopped at J.C. Penney.
Recent comments by Penney CEO Johnson that customers just need to be better educated about the new pricing policies sparked a backlash in the blogosphere. "To say coupon users need to be educated is absolutely insulting. . . . This executive needs a reality check," a shopper using the handle Rocketmom60 recently posted at one couponing site.
The second problem is the pricing concept. "Everyone who has attempted it has failed, because there is no way to position it empirically in a customer's mind," says the former CEO from a national retail chain, who asked not to be identified. "What does 'everyday fair pricing' mean?"
J.C. Penney is showing signs of wising up here. But it needs to move decisively, or competitors will continue to steal business.
4. Is heavy cost-cutting a good thing?
Apparently there's a lot of fat at J.C. Penney. Ackman says Netflix (NFLX) streaming video recently accounted for 20% of Penney home-office bandwidth use during work hours, and the typical employee clicked on YouTube videos 1,000 times a month.
Besides layoffs, the company has room to cut inventory and reduce spending on advertising and technology. Big cuts would highlight an inherent cost advantage -- Penney owns a lot of its real estate, and it has a lot of long-term, low-cost leases.
Ackman estimates that $900 million in cuts, the company's target, would equal $2.50 a share in earnings, or $30 a share at a price-to-earnings ratio of 12.
The problem is that a lot of the cuts have already been made. And the stock is still sluggish.
Morgan Stanley analyst Michelle Clark may have a good explanation. She thinks the aggressive cost cuts are hurting sales. "The scale of changes being made concerns us," says Clark.
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When I used to work for JCP in the 80's it was a great place to work.....Customer care was #1, The Ladies dept had beautiful Coats and Dresses, the Jr's dept had hip clothes, and the Childrends dept had the cutest outfits....We had medium to high priced Fashion Jewlry and the Shoes and Cosmetic depts were sharp! Not to mention a Bridal shop where you could get a custom gown for under $1000.
Associates got their regular store discount and then once a month they got a HUGE discount on top of their regular discount so they could buy clothes for work...(ladies their dresses, blouses, and Men their suites and ties... We were proud to work at JCPenneys.. Prices were not thru the roof, and a family could shop at JCP not go broke and still look fashionable..
If JCPenneys wants to shoot back to the top, they MUST go back to BASICS...
Have knowledgeable sales associates who want to do their job correctly, have good quality merchandise that customers want at a price they can afford....Our Bosses would say HI, Hello, THANK YOU, and even the store MGR. would walk thru once a day and say Hello.
Go back to basics., go back to where people feel comfortable and they will shop and be happy.
Toungs will wag, word will get around and JCP can go back to the top!
Yes they are. And what a shame. Their "gay friendly" ads are another mistake. Good bye JC it was nice knowing you!
Screw JCPeneny this plan has costed the workers a ton of money.. I worked at that place for 4 months during this transition and we started off at 35 hours a week.. Then after thsi transition which no one liked the sales plummeted and our hours went down to 30 then 25 then 20 tons of people quit... I quit too because i couldnt afford to even drive to work for the pitifull hours and pay..
I stopped by 2 days ago to check the store out and see if people i knew still worked at the place... The store was a Ghosttown... Trashy and cloths not folded right... The reason is because hardly anyone works there anymore.. They had 1 person at each corner of the store and that was it... A big difference from the 30 people that used to be in the store at one time or another.. I talked to some of them and they told me they are only getting about 4 hours here and 4 hours there of work and that was it...
Thanks a lot JCP execs for turning the store into complete garbage and hurting the worker.. But then they dont care as long as they get their big fat checks
In all my years of biz never saw any company self distruct like JCP. They will not recover because
their family image has sailed along with consistant pricing structure. They are a crap shoot at best. Sad, but they did it to themselves.
We liked the "old" JCP a lot. Someone in our family was there shopping (and actually buying things!) at least once a week. Now we have only been in the store once since they "improved", and then only to look. What a disappointment!
My advice (for whatever it's worth - remember I am only a customer!) to the current board and CEO:
1. Have the CEO go on national TV and apologize to the JCP customers. Say that we made a huge mistake, and are willing to admit it and go back to the format the customers apparently liked.
2. Then go back (immediately!) to the old format in which sales were forefront, coupons were relevant, ads were like the old ones, and brands were what they had (and even the store arrangements should go back to the way they looked).
3. To improve profits, update stores where needed; perhaps raise MSRP's a bit to cover some of the coupon and sales losses; and take a careful look at brands, marketing and purchasing to make improvements where possible.
4. Do all of this before the Holiday sale****o some of these huge losses can be turned around.
I do not like the changes at JCP stores. They have fewer brands and sale items. I find it harder to find my favorite brands, also. And the money they are spending on advertising in their monthly mailout is a huge waste. I look through it. It's professionally produced and looks good, but I give it a quick glance and throw it in the trash. It doesn't get my shopping juices running, to be sure. Hope things get back to more of what we were used to or the stores will suffer.
JC Penney himself would be ashamed of the way this company is now run. My advise, oust Johnson and pay somebody a reasonable wage to run the place with integrity. My money will not go there.
What a shame that Ron Johnson took such a sucessful company and ran it into the dirt.
"Proof? look at the stock"
Banking the customers would fall for "Fair & Square" Where subjested retail is "X" dollars and normally you would of gotten 25% sale price off and then your coupon. It is not that way any more. The products are cheap, your dollar shrunk.
Now you can't find any one to help you because they laid off hundreds of season employees to save having to pay out benefits. Catalog desk is no more. This company no longer cares about the customer or it's employees.
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