JC Penney CEO Johnson may be running out of time
After a disastrous holiday quarter, the board is now said to be considering either firing the embattled boss or selling the company.
A lot has changed since J.C. Penney (JCP) Chief Executive Ron Johnson secured his job in 2011 with the fervid support of hedge-fund manager Bill Ackman.
For starters, Johnson has lost Ackman -- and many other Penney shareholders -- a lot of money. He has also alienated much of Penney's core customer base by eliminating coupons and sales, bringing the more than 100-year-old retailer to a precarious position.
Now, Penney's board is losing patience with Johnson's leadership and is considering either selling Penney or replacing Johnson, if it can't reverse a steep decline in sales within the year, according to The Wall Street Journal.
The 11-person board includes Ackman -- the retailer's largest shareholder, who championed Johnson's appointment Ackman also once called Johnson "the Steve Jobs of the retail industry," referring to Apple's (AAPL) late co-founder. Johnson previously ran Apple's retail operations and is credited with pioneering the highly successful Apple Stores.
As recently as January, Ackman was coming out in support of Johnson, telling CNBC that the company would "make progress" under his leadership. "If three years from now, Ron Johnson is still struggling to turn around JC Penney, he's probably the wrong guy," Ackman said.
That three-year window has been shortened to only a year, after the shares plunged 24% this year through Tuesday. The stock took a dive last week after the company reported a horrendous holiday quarter.
One board member has expressed his displeasure with the massive sell-off: Steven Roth, chairman of Vornado Realty Trust (VNO), once the retailer's second-biggest shareholder. Vornado on Monday sold off almost half its stake in Penney, according to Bloomberg Businessweek.
The board, which includes Johnson, will closely track sales and merchandising over the next six months. If sales continue to suffer, the board will consider replacing Johnson or even selling the retailer, the Journal notes.
While Johnson was brought in to fix Penney, he has left it in more desperate shape than he found it. As MSN moneyNOW detailed on Thursday, the CEO has made a series of strategic missteps, including a legal mess with Macy's that could leave Penney's home-good shelves bare and failing to test the much-reviled no-discounts strategy before implementing it.
So the CEO MIGHT get fired ? The worst part of the story about this is all the employees who lost their jobs due to store closings who made low wages. It's always the employees at the bottom who make the least who has to take the back end of management's stupid decisions.
The company should have gotten rid of Johnson yesterday. I don't work for JC Penney, but I feel bad for all the employees who had to become unemployed due to his decision making.
I used to love JCP but now I am thinking twice before buying from there. It is really sad
JC Penney is very easily fixed by simply asking customers what they want rather than trying to tell them what they want. At Apple, they are innovating--what they are providing is new. When a product is new--yes, you can convince people that they need it. But, clothing is not new. The customers who are willing to be talked into products that are "new" are not shopping at JC Penney, and they never will--they already have their favorite designers, and those designers aren't going to sell at JC Penney. It was an interesting idea--to try and bring the cutting-edge designers to JC Penney--but they don't want to be there.
JC Penney had a good business model--provide standard items (camp shirts of the same type and quality, but in the current color trend; bath towels by good manufacturers; store brands that mimicked, in quite good quality, things like Dockers)--at a good price to those who will pay full price, and then mark the products down as the inventory dwindles. They started having trouble not because of that business model, but because they didn't have things in stock when people wanted them.
The best thing for JC Penney at the moment would be to shift their online store back to the old model--have standard items that basically do not change in anything other than colors (to reflect the trends), have those standard items at a good price initial price before a season, and mark the price down as the stock dwindles a bit because the season is ending or the colors are going out of fashion, and then order new stock as a new season is about to begin. If they want to make the on-ground stores into "boutique" stores, that's fine. But the on-ground stores should have kiosk areas for those who want to order the more standard items--with staff to help people with the kiosks.
This is not a hard fix--that they won't do it shows how little the current CEO is working and how much he cares. He's getting good money and apparently intends to retire after this job and/or start his own business. He's not actually trying to do anything for JC Penney, and it shows.
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