JC Penney getting promotional again

The struggling retailer gets back to basics and revamps sale efforts.

By Benzinga May 31, 2012 1:16PM

Image: Poster proclaiming Sale up to 50% off and shoppers silhouetted in foreground © Michele Constantini/PhotoAlto Agency RF/Getty ImagesBy Scott Rubin, Benzinga Staff Writer


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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470Comments
Jun 1, 2012 4:29PM
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this is what happens when the people at the top are totally disconnected from the working class American.
May 31, 2012 5:14PM
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JC Penney has done some of their longtime employees very wrong. My sister lost her job after 30 years with the company. She gave her full dedication to the company, since she started working there right after high school. Penney's need to treat their employees right and quit changing sales strategy. You can not become stable by changing ideas and treating people dirty. I am sure Mr. J.C. Penney is rolling over in his grave at how his business has evolved.
May 31, 2012 3:38PM
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As opposed to best price Friday, why not try the best price weekend...Too often, people don't have time to shop on Friday, even if they think they are getting an amazing deal...but if it was carried through the weekend (Friday through Sunday), you may see more sales and people coming out....Also, the every day low prices are not low enough for what JCPenney customers are used to, especially without the amazing sales...The prices match that of other department stores now and therefore, people will shop at the other department stores if they will get a better deal.  Know your customer base and expand on it, but don't alienate them to obtain new customers.

 

Jun 1, 2012 9:26AM
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My opinion:  It is not about the sales, it is about the quality of clothes. I used to be able to walk into JCP and find just what I was looking for in my petite size for my age group (70+) at a reasonable price, quality material, well-made, MADE IN THE USA!  Now, that is not the case. 

 

Size doesn't mean anything anymore.  I have to try on sizes from small to x-large to find a size that fits me!  Could it be because foreign countries don't know how to size for American women?  I didn't used to have this problem!  Just sayin'

 

PLEASE BRING BACK USA MAKE PRODUCTS, AND I WILL BUY FROM YOU AGAIN!

May 31, 2012 3:31PM
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Haven't shopped there since the change, very dissappointed...This was my favorite store, looked forward to catching a sale regardless of the day of the week...

May 31, 2012 3:45PM
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Need better clothing choices for the middle age women. Cuter/fun styles and for ALL sizes.

 

May 31, 2012 4:57PM
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I HATE the new system...As a woman, I am trained to look for sale signs. I also love coupons....no sales- no coupons - no busy from me...I've had my JCPenney card for well over 30 years and I can you that I've only been there twice this year and both times I left disappointed. I also miss the sale catalogs they used to send out for the housewares. Every curtain in my house is from JCPenney. But now I have no idea whats available and I hate searching thru websites....put a woman in charge and put it all back the way it was..
May 31, 2012 7:48PM
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I agree with Kimberly.  I have been saying for years that the buyers have no clue what real people wear and buy. The styles are not what the average person wears on a daily basis. The fabrics are not very washing machine friendly. Some of the looks are too racey and ghetto.  Not quite sure what crowd they are targeting. The prints on some of the tops and dresses are just down right UGLY. Who are they buying from and who is their buyer??  I still go there a little mostly out of loyalty. I have been a customer for over 40 years.
May 31, 2012 9:38PM
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I gave Penny's another try last weekend. I still felt that the merchandise looked cheap and it seemed like all the women's clothing is geared towards the teens and 20's crowd.
May 31, 2012 7:43PM
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I think JCPenneys new sales pricing is a gimmick.  Case in point: in 2011, I bought a Bakers Rack on JCP online.  The cost was 199.99 and this was not a sales price, just their regular price.  Now, in 2012, that same Bakers Rack on JCP online is 250.00, their "every day" price.  What gives???  Does this Ron Johnson, CEO, think we (the consummers) are stupid?  I have not been in the store this year, have not shopped online at JCP and I hate their new glossy catalog geared to teenagers.  I'm not surprised to read that their stock is down 26%. 
May 31, 2012 9:11PM
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Sir: Get back to basics. People like sales, comparison with others, and whomever has the best offer, gets the business. You are on the way to the bottom : just like Montgomery Ward, and Sears is not far behind. Don't tell the public what they can have:; "sell" it to them. Since the news stratgery started, I have not been in JCP.
May 31, 2012 10:32PM
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Wouldn't it meet great if J.C. Penney started contracting their products to American Manufacturers only! What a novel idea! Their quality would rise and I'll bet interest in them would also. I don't mean Union only. I mean shops set up in right to work states and non-union in Union states. Right there you could knock off 25% to 30% of cost, which could be passed on to the customers who now will have jobs.
May 31, 2012 4:04PM
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I liked when they had their $10 off $25 coupons. Then I could choose what I wanted to buy. Their Friday sales are on what they think we wanna buy not what we want. Go back to the old way. so I can enjoy my shopping experience. Plus, the new way you have to dig through the whole store to find the deals, that usually are not good ones.
May 31, 2012 4:38PM
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Seriously: I wonder what it must cost to publish and deliver all of these silly booklets that they ship out every month? Simple ads in your local papers, and on key internet sites would be far cheaper. Furthermore [I am so sorry to have to report this] --- those Chinese made clothes, and colorful junk from Pakistan, India and Asia in general do not hold up any better than the name brands at Target and Walmart, where they sale for much less, than these "everyday low prices" at JCP.
May 31, 2012 8:09PM
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JCP has been my go-to place to buy clothes for years.  I really don't mind the new pricing strategy, and I don't miss the coupons because now I don't have to remember to bring them with me (I drive two hours to go shopping as our JCP is very small and has NO selection).  Also, I like that there isn't a time limit on 'door busters'--again, because I would have to leave early in the morning to make it on time.

However, I think the new catalog is a huge waste.  I thumbed through the first one I got; now, they go straight to the trash without even looking at them.  They are pointless.

Also, I don't like the layout of the store with all of the different designer brands.  I still go there, but I buy less because it takes me so much time to wander around and try to find what I want.  There's about a dozen different sectiong of women's dress slacks, seriously?  Maybe I'm in the minority, but I don't shopy by brand name.  I just want to go look at several different pairs of pants and buy the one that fits the best.  I don't care what the tag says.

I am all for the new pricing strategy but I wish they would reconsider the store layouts.

May 31, 2012 7:19PM
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I used to shop at JCP all of the time, since the BIG change I can no longer find the quality merchandise JCP was famous for and the new co-ed fitting rooms are just not for me. Being in my mid-fifties I prefer not to try on clothes with a teenage boy prancing through the fitting room and carrying on with teenage girls. JCP you have taken the new shopping experience just a tad too far.

Jun 1, 2012 12:47AM
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Having shopped at Penney's for years, was not impressed with the latest hype regarding "Best Price" deals.  Upon checking and comparing the prices it was found that the original price had been inflated as much as 30% before the new "Best Price".  I was able to find much better deals at Macy's using the star rewards pass that comes in the mail and at Dillard's using their sale promotions from the mail.  Sorry JC, you just lost a longtime shopper due to Johnsons pricing strategy.  I wonder if there was a reason he no longer is employed by Apple. 
May 31, 2012 6:55PM
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JCP has lost its appeal.....My wife and I have been JCP card holders for over 40years...Have not made a significant purchase in 2 or 3 months...Quality and style is not to be found in the ladies dept. at all...

Local store has just closed the catalog counter, now everything has to be ordered by computer...Just because Mr. Johnson came from Apple don't mean that everyone has a computer and not everyone shops with a computer, some people like to order from the book and the BIG catalog should be back on the shelfs, all these little catalogs that are mailed out is only costly to the company. My wife puts them in the trash. 

Maybe Mr. Johnson will get the BIG CEO lay-off bonus when the stock holders get tired of losing money....

May 31, 2012 8:11PM
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I used to find some good deals at Penny's all through out the store, not anymore not for a long time even before the new strategy. I have worked in retail for a long time. Customers want to see a discount, not a set price. They want to know that, that $50.00 dollar item  is going to come up an extra 50% when they take it to the register plus whatever discount they may get for being a charge holder. Some stores used to be fun to shop at not anymore, they've taken the fun out of it.

Boy do I miss Mervyn's!

May 31, 2012 4:30PM
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 It is reminiscent of the clown that destroyed GE, then tried to destroy The Home Depot (they paid him 21 million dollars to "just leave") --- and then, Ill be damned if he didn't try to destroy Chysler, before the United States Congress forced him out with the "auto loan bailout". What is it with these rich idiots who buy things, and then go "shopping" for somone to run it? The hand writing is on the wall --- within a year JCP will be paying this clown millions just to get rid of him --- and worst of all; the price of all that will fall on the JCP consumers. A blind and deaf monkey, fresh out of high school could do far better for seventy or eighty thousand a year, and free sodas.
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