JC Penney getting promotional again
The struggling retailer gets back to basics and revamps sale efforts.
When former Apple (AAPL) executive Ron Johnson was hired as CEO of struggling retailer J.C. Penney (JCP), he outlined a strategy that spurned the company's previous highly promotional approach in favor of more straightforward pricing.
To that end, the company implemented a three-level selling plan and scrapped its numerous sales and promotional events. The new approach was announced in January.
In the first leg of the strategy, J. C. Penney cut prices on all of its merchandise compared to last year's regular pricing and called this "Every Day" low prices. Additionally, the company implemented sales that last a month, called "Monthly Value" discounts. J.C. Penney also holds sales on certain merchandise marked for clearance on the first and third Friday of each month. These sales, known as "Best Price" deals, coincide with many consumers' paydays.
At the time of the announcement, Johnson was firm in his conviction about the change in strategy at the retailer. "We have made the decision to change our pricing strategy, and we're going to stick to it," Johnson said in January. After a disastrous first-quarter, however, it now appears that J.C. Penney is looking to revert back to a more promotional stance. The company held a Memorial Day weekend sale and is reported to be planning a Black Friday event. In all, the retailer has planned an additional five Friday sales this year, expanding its "Best Price Friday" program.
The catalyst for the move appears to be the company's dismal first-quarter where total sales plunged 20% and same-store sales fell 19%, helping drive a steep operating loss in the period. The results sent JCP shares down nearly 20% on May 16 and have raised questions about whether the brand is fundamentally broken. In light of the new information from the company about additional sales, it is clear that Johnson and his management team are feeling the pressure.
The company told Charles Grom, retail analyst at Deutsche Bank (DB), that it would be holding five extra strategically timed "Best Price Friday" events this year, including one on Black Friday, according to the Wall Street Journal. The other special Friday sales may be held during the Christmas and back-to-school seasons, the Journal speculated. According to Grom, the change -- occurring so soon after the implementation of the straightforward pricing approach -- could backfire.
He described the move as "a change in strategy that is an admission the company's existing three-tiered pricing strategy has flaws -- less than 120 days since Ron Johnson's new model took course," Grom said. "We believe the move could confuse its shopper base even more, with some Fridays now 'Best Price' and some others not."
In any event, investors continue to sell JCP shares amid the confusion and terrible operating environment at the company.
JCP opened Thursday at $26.86 and is currently trading at $26.07, down 26% year-to-date.
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I saw the advetisements for Pennys on TV and frankly I could not understand what they were trying to do. Now that I read the article spelling out their plan, it seems to be sound. They should fire their advertising agency for not getting word out. Adds were generic feel good type without the details of what was happening.
Perhaps if they stopped using pro-gay ads, they would stand a better chance at growth. I shopped at JCPenney when I was young, their prices were about average and their clothes a touch above. Haven't shopped there in a long time though.
I sure as hell wouldn't go to a store where I thought the clientale was gay and I wouldn't want the children exposed to gay couples holding hands and such who probably appreciate the gay ads and shop there.
Oh----- they did.
I really liked the new pricing strategy. I hate all of the sales that these companies think they need. I think that it lowers department stores to the level of Wal-Mart. It was refreshing to just be able to go in and know what the price was and I really enjoyed not seeing the thousands of sale commercials that they used to run (they are amazingly annoying!).
I don't shop much at Penney's because of their selection of merchandise. A lot of their items, from housewares to clothing, feel like they are 5-10 years behind today's current styles.
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