2/28/2013 7:53 PM ET|
4 reasons JC Penney's Johnson could soon be out
The former Apple hotshot was once hailed as the department store's savior. After a series of missteps, his time is running out.
The former Apple executive was brought in to revive the more than 100-year-old retail chain, but a series of missteps has left the department store in more desperate shape than when he found it.
On Wednesday, the company reported a complete disaster of a holiday quarter, with more than half a billion dollars in losses over just three months. Sales during the period -- the most important one for retailers -- plunged 28.4% from a year earlier. The shares took a nosedive today, with the stock declining at one point by 22%, the biggest intraday drop since at least 1980, according to Bloomberg.
While Johnson had predicted some rocky moments as he tried to refashion Penney, yesterday's bloodbath probably wasn't what he -- or shareholders -- had had in mind. Now, some investors and observers are speculating how much longer the would-be savior CEO will keep his job.
Here are four missteps Johnson has made, which led to yesterday's terrible earnings report:
Failing to test: When a colleague suggested to Johnson that the company test a new no-discounts strategy, he bristled, according to The Wall Street Journal. "We didn't test at Apple," Johnson reportedly said. By all accounts, the no-discounts strategy alienated many of the company's loyal customers.
Expecting shoppers to act like Apple fans: Johnson, who created Apple's retail stores, got rid of coupons and sales, adopting a strategy of take-it-or-leave-it pricing on clothing. The problem? Penney shoppers aren't like Apple's fans, willing to pay a premium for the latest gadget. As the Harvard Business Review notes, Penney "sells fairly commoditized products."
Creating a legal mess with Macy's: Johnson lured domestic doyenne Martha Stewart into a deal to create a "store within a store" at Penney. The problem? She already had a deal with Macy's (M). Johnson's move has embroiled his company in a lawsuit from Macy's, with an embarrassing trial underway right now.
Advertising disconnect: While some have lauded Johnson's fresh advertising approach, Penney's marketing has left some consumers confused. Its ads tout a fresh image, but as Mediapost points out, that doesn't "mesh with what's currently in the stores."
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Equity indices were pressured from the start following some overnight developments that weighed on sentiment. The market tried to overcome the early weakness, but could not stage a sustained rebound, ... More
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Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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