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.
J.C. Penney (JCP) Chief Executive Ron Johnson is certainly killing it, but not in the way that shareholders had hoped.
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."
Why would you choose a techie to run an apparel and housewares store?
Apple consumer devices are a long way from department stores like JC Penney.
These kind of decisions are destroying this company.
cleanup and maintain dressing rooms.
I like a more conservative dressing style without too many neon colors.
Quality with profitable but fair pricing keeps you in business.
Instead of going after Martha Stewart find younger names to sponsor your products.
Kohl's sells a Marc Anthony line of clothes which I admire even though I am 62 years old.
Sales and coupon gimmicks work when done smartly.
He doesn't have a clue how to run a retail giant like Pennys.
Someone please post the phone number and email to Pennys so we can call and email and register our dislike of the way Johnson is ruining Pennys.
We were shopping at Pennys long before Johnson came along. We don't need or want him running the stores we shop at.
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A basic income policy can actually ensure a decent standard of living for everyone.
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