J.C. Penney will also have to woo its workers

As the stumbling retailer tries to rebuild ties to shoppers, it has a massive employee morale problem to deal with as well.

By Aimee Picchi Apr 15, 2013 10:55AM

Customer Service counter at the J.C. Penney store in Westminster, Colorado on February 20, 2009 (© RICK WILKING/Newscom/RTR)Under ousted chief executive Ron Johnson, J.C. Penney (JCP) had a massive housecleaning, sweeping away thousands of  jobs as it eliminated popular clothing lines like St. John's Bay. 


Now, returning CEO Myron Ullman has a knotty problem on his hands: how to revive those brands with a company suffering from deep morale problems and an employee base that has shrunk by 23%, reports The Wall Street Journal.


When Johnson completed his first full fiscal year on the job, Penney employed only 116,000 people, down from its recent historic level of 150,000, according to the report. 


While the ex-CEO argued that the job cuts were needed to boost Penney's financial performance, the opposite resulted: Loyal customers fled, with many angered at his decision to dump St. John's Bay. Sales plunged 25% last year. 


St. John's Bay may have been a linchpin leading to Johnson's failure. MSN moneyNOW readers often cited the disappearance of the casual-wear clothing line as the reason they abandoned Penney stores. 


"If JC Penney brings back the brands that they ditched, St. John's Bay women's jeans for instance, I will think about shopping there again......but not until then," one reader wrote on Thursday. 


And it turns out that Penney is planning on bringing back the clothing line, which had brought in annual sales of a billion dollars, The Journal notes. 


Why would Johnson single-handedly get rid of a brand that racked up such huge sales? The former Apple executive wanted to "de-frump" the stores and instead brought in edgier designers such as Cynthia Rowley. The problem, though, was that Penney customers had been happy with those comfortable clothing lines. Feeling alienated, many of them swore off shopping at the retailer.


Johnson misunderstood the store's customer base, which tends to be older than 55. One-third of its customers earn less than $35,000 a year, according to BloombergBusinessweek. Getting rid of coupons also alienated his price-conscious customers.


Penney plans to return coupon advertising to newspapers, activist investor William Ackman said on Thursday, according to Bloomberg. The company needs to "calm the vendors," he added. 


But what to do about those morale problems? According to The Journal, the layoffs weren't pretty. Because Penney didn't have enough staff to cut people in face-to-face meetings, groups of employees were ushered into Penney's auditorium to hear the news. Sometimes more than 100 people were fired at once, the story notes. 


With Ullman's plan to bring back St. John's Bay, he might be taking one step toward dealing with his alienated customer base. And getting rid of Johnson was likely a big boost to internal morale. According to the New York Post, clapping and laughing erupted last Monday at an employee meeting when word of his ouster was announced. 


More on moneyNOW

Tags: JCPRetail
225Comments
Apr 15, 2013 1:58PM
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It is just unbelievable that a Board of Directors would sit by and allow Johnson to ruin this good company, and do the damage he did.  This has to be the worst CEO disaster of all time.  The Board should be fired too.
Apr 15, 2013 12:21PM
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Went to JCP on Saturday with a 20% off coupon. Left with two polo shirts and 2 new pairs of shoes. I for one, welcome back the coupons.
Apr 15, 2013 1:48PM
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Great to see the customers are finally being heard.  I am so glad they are bringing back the St Johns Bay Brands. 
Apr 15, 2013 2:10PM
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Bring back the old JC Penny's, good merchandise, sales, catalogues, and other items besides clothes, maybe it will come back.
Apr 15, 2013 1:51PM
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They paid millions and millions to a CEO that single-handling drove the company to ruin. Not only should of the CEO been fired but the entire board as well, for making such a bad decision, but the Board sure not gonna fire themselves. If I had any stock in that Company I would of unloaded it long ago.  I Just wonder if the damaged it to great now for a recovery
Apr 15, 2013 2:06PM
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Well, firing the CEO is a good first start. It should have been done a long time ago.
Apr 15, 2013 2:25PM
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JCP helped put me thru college and people that buy there, buy for the specific items like St Johns Bay.....they are not typically Nordstrom customers and have been for generations loyal to the JCP labeling......The former CEO messed with a good solid foundation....damaged customer loyalty and now employees as well!
Apr 15, 2013 1:57PM
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I am like most ..When I can get St Johns Bay again I will shop there again.
Apr 15, 2013 2:31PM
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I'm glad to see that they are finally coming to their senses.There are loads of "younger crowd stores" for the rest to shop at besides who shops at Penny's is 50 somethings and up.We are middle class people that want coupon savings and sales. Get it right this time!
Apr 15, 2013 2:44PM
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I will surely be back at JC penney when they bring back the St Johns bay and of course the Old JC Penney. I was a very loyal customer for years and always left JC Penney with two shopping bags full. Glad to hear that the CEO is gone because his business turnaround and tactics was damaging to JC Penney. We love St Johns Bay and all the coupons and clearance racks with great merchandise. Baby boomers shop at JC Penney and we have the money. I am glad that the voice of the people were heard because no business can make it without loyal customers. You give us great merchandise at great bargains, coupons, and all the goodies and we will shop till we drop. Thanks for listening to us and bringing back our favorite brands. Well done JC Penney. You will be bouncing back again.  
Apr 15, 2013 3:07PM
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This is another reason most CEO's are just overpaid idiots.  They make changed for the sake of change but have little regard for their employees or their customers.  Old Coke and New Coke is a good example of how the guy at the top is just overpaid idiot.

 

There is a difference between innovation and self immolation and I bet the ex CEO does not know the difference.

 

I liked going to J C Penny since their clothes always seemed to be a fair value but seldom go anymore because they do not seem to carry anything I want to buy even though I has a $10 coupon.

Apr 15, 2013 3:18PM
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I believe the company should get back all the millions they paid this CEO, he did not deserve they all that money; considering he drove the company to ruin.
Apr 15, 2013 3:04PM
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Many of the good or experienced associates left because of the poor business decisions or were laid off.  Now they have high school kids working there who don't know anything and will probably move on after they graduate.  Penney's used to pride themselves on their knowledgeable customer service.  I don't know how they will get that back.
Apr 15, 2013 2:50PM
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J C Penney also needs to get rid of the Martha Stewart line of products. I will never buy her products.
Apr 15, 2013 2:45PM
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Finally, someone came to their senses!.  I've shopped St. Johns Bay for 25 years - fit well, comfortable and AFFORDABLE.  Went in a few months ago and the brand was gone - I was pissed
and haven't gone back.  I'm 59 -

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I have been shopping JC Penny for decades. Used to love their catalog, then the changes started to happen with a new hipper catalog, I shop for big and tall at their store. Well I went into my local Pennies the other day and the store is a disaster to me with big and tall stuck back in the corner of the store with no inventory. What happened to Izod big and tall products? What has happened to JC Pennies??

Apr 15, 2013 2:24PM
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I was suprised to read about st. johns bay clothing that pennys was dropping some of its line, that was the main reason I started to shop elsewhere, as I couldnt get the comfortable st johns bay shorts for men, with elastic sides, very very comfortable for my expanding waistline, by the way, I am 64 yrs old.man. I have been a faithful jc penny shopper for most of those years.
Apr 15, 2013 2:02PM
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I did not know jcp owned Eckert drug stored before the rite aid buy out, learn something new everyday. I refuse to use Rite Aid. I worked in the headquarters for a month. What a mess. I unfortantly had a blemish on my record. I told them from the get go, in both interviews and in my info packet after I was hired. I signed the rights for them to do a back ground check a full month and a half before I was hired. I was eventually hired and the first 3 weeks I did a bunch of busy work because my computer was not set up for me to use. My last day the computer was finally set up and I worked my but off that day putting old Eckert store info into the computer system. The end of the day they called me in to fire me claiming I lied to them. Even though I stated I was up front and honest from the get, they still escorted me off the premise. HOrrible eperience and I refuse to shop at rite aid.
Apr 15, 2013 3:04PM
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I like St. John's Bay, however, also like the newer look too.. As a working woman who doesn't want to dress like my 80 yr old mother or a 19 yr old college girl, I think a nice mix is necessary.  Also, I think clothing should again be separated by depts., i.e. women, plus, jrs, etc.

I do like the new pricing set up, but the old prices with sales wasn't so bad, but the new prices had me looking and shopping more

Apr 15, 2013 2:02PM
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JCP needs to go back to what worked. They had a store in Reading, Pa. a lot of business with lower income and prices plus coupons that store was constantly busy. Now they got rid of those employees and sold it to a two bit junk store, it stinks. I don't go there no more.
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