6/5/2012 6:29 PM ET|
Is JC Penney the next Sears?
One big potential issue: Penney is cutting out "unproductive inventory" -- items that don't sell as much. This supposedly brings down costs by reducing the amount of money tied up in inventory, but it may be a terrible move. Even though less-popular items don't sell as much, they bring in loyal customers who buy lots of other stuff while they're in the store.
Wal-MartStores (WMT) reduced the number of items for sale in 2009 to "reduce clutter," the same logic Penney is using now. Wal-Mart has since returned a lot of these items to the aisles, because the change cut into shopping trips, hurting overall sales. "These big shots sitting in their offices, they want to have this clarity," says Davidowitz. "But how about the customer? The customer is everything."
5. Will creating a 'mall within a mall' really help?
Citing much higher sales per square foot at specialty stores compared with department stores, the new team at J.C. Penney is setting up a lot of "stores" inside Penney.
To show the potential here, Ackman and Penney managers like to cite the sales per square foot of over $600 at Penney's Sephora beauty product shops, compared with $154 a square foot at Penney overall.
Eventually, a Penney store could have 100 or more shops, like Martha Stewart and Michael Graves in home goods, or Watchgear by Tourneau Watches & Accessories.
This might help because Macy's, which uses this "mall within a mall" concept, has sales per square foot at $174, near the hoped-for target at Penney of $177. But it's not a lock. "Sephora is a success, but is strong enough to pull it off. Most brands are not," says the former retail chain CEO.
Buy below $23
J.C. Penney and Ackman declined to talk with me. But in news releases and comments to analysts, Penney says it offers great values and is changing for the better. The company says 2012 is the "transition year," and growth will follow in 2013.
Meantime, wait for further declines to buy. Goldman Sachs (GS) analyst Adrianne Shapira has a neutral rating on Penney. Deutsche Bank's Grom is waiting for clearer signs that the Penney overhaul is working. Morgan Stanley's Michelle Clark sees more downside risk, and she suggests considering a buy below $23.
"I think there is hope," says Davidowitz. "But Penney is going to have to slow down and re-strategize." My guess is they will, so I'll go with Clark's $23 as a buy limit.
At the time of publication, Michael Brush did not own or control shares of any company mentioned in this column.
Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.
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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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