Is JC Penney imploding?
As the department store energetically reinvents itself, customers reject its new pricing model, and the plunging stock price reflects their sour mood.
JC Penney (JCP) reported this week that sales dropped 20% in the past quarter, a lower-than-expected result that caused the company's share price to suffer its worst single-day loss in 40 years.
Boosting sales has "been tougher than anticipated," conceded CEO Ron Johnson, brought on last year to "inject much-needed color, life, and enthusiasm into JC Penney's drab stores," says Abram Brown at Forbes.
The news in June 2011 that Johnson, the genius behind Apple's (AAPL) popular retail stores, would become CEO triggered a surge in JC Penney's stock price. So far, though, he has disappointed. Here, a guide to JC Penney's travails.
Why are sales falling?
Customers are proving allergic to JC Penney's new pricing plan, implemented in January. Johnson switched the chain's focus from blockbuster sales and discount coupons to an "everyday low" pricing scheme, in which customers could more or less expect the same prices all year round.
"It seems many faithful Penney customers have stopped shopping [there] altogether," says Anne D'Innocenzio at The Associated Press. Johnson admits that customers without "a coupon in their pocket or in their hand" and an inadequate grasp of the new pricing model had less incentive to go to JC Penney.
Why don't customers like consistent low pricing?
Johnson says that a recent advertising blitz "failed to communicate to consumers exactly what its new pricing policy meant," says Barney Jopson at Britain's Financial Times. One ad, called "Do the Math," uses a summer dress "to illustrate how its everyday lower price comes out to less for a shopper than a sale and a coupon," but the ad didn't catch on, says Phil Wahba at Reuters.
The widely criticized spots mimicked the "whimsical style" of retail giant Target (TGT) (where Johnson also worked), but sacrificed a clear message about prices in efforts to be cute, says D'Innocenzio.
Will JC Penney return to big bargains?
Not according to Johnson. He envisions the entire overhaul taking at least four years, and says initial losses are to be expected. While the "new pricing strategy underscores how difficult it is for a company to change the way consumers behave," JC Penney and other retailers think it's imperative to wean customers off the deep discounts that have been par for the course since the recession began, says D'Innocenzio.
Can JC Penney turn the ship around?
It depends whom you ask. Some investors say "Johnson's ambitious ideas need time to gel," says Brown. And Johnson has more new initiatives up his sleeve, opening a line of boutique stores that will appear in each JC Penney beginning this August, says Roland Jones at MSNBC. The chain has also announced new collaborations with high-end designers Vivienne Tam, Betsey Johnson, and Michael Graves.
Best Opinion: Forbes, A.P., Financial Times, Reuters, MSNBC
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Wrong, wrong, wrong, wrong, wrong, wrong, wrong, wrong, wrong, wrong. We grasp the "new pricing model" just fine. It's a model that attempts to rape customers by doubling the price on everything we buy. (ALL of my clothes that I previously bought at JCPenney doubled in price under the new pricing model.)
So sure, it's true our perceptions of the pricing model have stopped us from shopping there. But it's not our perceptions' fault, it's the pricing model.
A few reasons why I no longer like JCPenney and try to find ways to avoid shopping there.
1. Their "everyday low prices" aren't even close to a bargain. This month I priced a 5 foot area rug for my home. Without a coupon the prices Pennys offered were no better than the big online rug stores (which charge no sales tax for most states). There were very few "monthly price" rugs available and I didn't want to wait until a rug I liked had its price lowered for a "Monthly Sale". I bought a rug on closeout from an online discount site for about 40% less than Penneys plus no shipping and no tax.
I used to buy all my area rugs from Penneys. I never will again unless they bring back the coupons. The prices stink.
2.I have not once been into a JCPenney store since they stopped sending out coupons. No coupon no incentive to go. These prices will be here next month and next month and next month....
3. Their quality has really really gone down hill!! I bought a set of "pure perfection" towels last year while they still offered coupons. The towels are 5 months old and the hems are starting to unravel. Crap crap crap!!! Why did they ever get rid of the JCPenney home collection towels??? These were award winning towels that held up very well. I used to buy all my towels from JCPenney...never again. I have since found a micro cotton line of towels from another department store that I love. Yes they cost more but the quality is incredible.
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