Time for JC Penney to say goodbye to CEO?

The beleaguered retailer posts yet another dismal quarterly earnings report.

By Jonathan Berr Nov 9, 2012 11:48AM

J.C. Penney (JCP) CEO Ron Johnson continues to offer investors more spin than a dreidel at Hanukkah instead of actual results. His job is now clearly in jeopardy.

The iconic Plano, Tex., retailer Friday posted quarterly results that were even more dismal than Wall Street had feared. Its net loss narrowed to $123 million, or 56 cents a share, versus $143 million, or 67 cents, a year earlier. Total sales plunged an eye-popping 26.6% to $2.93 billion. Excluding one-time items, the loss was 93 cents a share. Wall Street had forecast a loss of 7 cents on revenue of $3.27 billion, according to Dow Jones. As earnings misses go, this one's huge.

Not surprisingly, shares of J.C. Penney are plunging in early trading. They have fallen more than 38% since the start of the year. Johnson's magic touch that served him well at Apple (AAPL) has eluded him at J.C. Penney. Sensing that he may be on borrowed time, Johnson is pleading for investors to be patient. His hubris is remarkable.

"Today, JCP is really a tale of two companies," he said in a press release. "By far the largest part of our store is the old J.C. Penney, which continues to struggle and experience significant challenges as evidenced by our third quarter results. However, the new JCP, centered around the shop concept, is gaining traction with customers every day and is surpassing our own expectations in terms of sales productivity which continues to give us confidence in our long-term business model."

It's hard to see what he means. Same-store sales, a key retail metric, plunged 26.1% during the quarter, indicating that Johnson's store-in-a-store strategy, isn't gaining traction. His gimmicks, such as free kid's haircuts and family photographs, while interesting are not enough to convince these people to actually buy J.C. Penney merchandise.

Mary Altaffer AP PhotoJohnson has got plenty of self-confidence. Recently, he told Fortune, "We're going to create an entirely new retail model that's built for the next 100 years." Some in the retail world are still convinced that Johnson is a genius who needs more time to realize his vision.

"Call me crazy, but this man has a reputation for vision and a track record that prompted members of the J.C. Penney board to hire him in the first place," wrote David Selby, a former Sears (SHLD,) executive, in Ad Age. "They wanted disruption, and they got it -- but disruption is very, very messy and takes time."

While Selby has a point, his call for patience doesn't carry the same weight as Bill Ackman's. The head of Pershing Square Capital, which owns about an 18% stake in J.C. Penney -- far the retailer's largest shareholder -- earlier this year had argued that the retailer's future under Johnson was bright. Whether he still feels that way is not clear.

If Johnson fails to produce decent results during the holiday season -- and the odds are against him -- the board will be forced throw in the towel and fire him. J.C. Penney would then be forced to sell itself at a fire sale.

Jonathan Berr does not own shares of the listed stock. Follow him on Twitter@jdberr


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437Comments
Nov 9, 2012 12:45PM
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A year ago, before the "new" Penny's emerged I was a very loyal customer.  I had bought new window treatments for my living and family room.  I had also bought all new bedding for our bedroom  and matching items for our master bath.  I had spent over $1000.  It all turned out great!  Then I noticed a shift in the store.  It began to look stark and empty.  Not at all welcoming.  The clerks didn 't look enthused, just kind of mopey.  The inventory began to recede and I ended up just walking out of the store empty handed every time.  Ended up most times at Macys or Kohl's with my coupons that saved me a ton.  Penny's may tout that they have "lowered" their prices all the time, but if you can't find anything to buy what's the point.  I still found my coupon items cheaper than what Penny's had to offer.  They need to get rid of this guy.  All he's trying to do at this point is line his pockets for as long as possible before they decide to throw him to the curb.  It will probably be to late for them to turn it around.  For me anyway I have gotten out of the habit of even thinking of Penny's as a place to shop.  I start with Kohl's and go to Macys after that.  I haven't stepped in a Penny's store for probably 6-8 months. It's hard to change peoples shopping habits. 
Nov 9, 2012 1:27PM
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I am a 50 something year old woman, not a doctor, not a lawyer, more like an Indian Chief and I can't find anything in the store that isn't geared toward a teenager. Bring back the 80's and 90's. Bring back the customer service and the quality.

Nov 9, 2012 12:43PM
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Sorry, but I miss the Big Book.  That wonderful catalog that had everything in it and that I kept all year long.  The new little catalogs look like plain hype.  They do not propel me to buy ANYTHING.  Make them look more real. 

I love Penneys (can't call it jcp)!  Keep the $10 coupons coming!

Nov 9, 2012 1:27PM
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I have been a life-long "Penny's" shopper and grew up shopping their with my mom and grandmother when I was a kid. I used to look forward to getting the $10 coupons in the mail and waiting for their Doorbuster sales. Now the store is flat, no shopping incentives and doesn't have the same appeal. I don't understand the over haul anyway. If something's not broken, don't try and fix it. Corporate needs to realize this before it's too late. I agree with CB841, I miss the Big Book too.
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I became a loyal customer of JCPenney from back when Hecht's changed to Macy's .  I could walk into the store and find quality merchandise at every corner, sale prices/coupons that were great, and I fully dressed my grandchildren from JCP's children section.  HOWEVER...the new concept is NOT working. Their monthly advertisements look good but end up in the recycle bin because they give you no information.  The store has reduced substantially their inventory, the quality and selection of merchandise has decreased., etc.  When I walk into the store and get angry....because it use to be a great place to shop.  I now take my business to Macy''s and Kohl's.  JCP will disappear like some other great companies....very sad.
Nov 9, 2012 12:31PM
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Prices up, quality down--don't shop there anymore!
Nov 9, 2012 1:25PM
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Used to love Penneys but not any more - prices are not lower and the store looks empty - fire him without a bonus!!
Nov 9, 2012 12:53PM
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How to alienate your customer base and ruin an iconic company 101.  This is a classic case of hiring a guy who had success with high tech cutting edge products that sold themselves and putting him into a highly competitive mature market where the same ideas did not work.  IMO one of the biggest mistakes they made was that crazy marketing campaign with the abstract commericals.
Nov 9, 2012 12:52PM
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When is the JCP board  going to wake up and accept JCP isn't Apple? Johnson is nose diving the company right into oblivion. How may quarters of lower sales, decreasing market share and diminishing profits is it going to take?
Nov 9, 2012 1:24PM
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When I tried shopping at JC Penney on line, anything I would want was already out of stock.  Also, why do they keep printing those broshures that are most likely very expensive and don't offer much.  Their women's clothes are so ugly no one would want to wear them.  The last two purses I bought from them, came apart.  Their stuff gets more limited and the quality gets worse all the time
Nov 9, 2012 1:33PM
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If you are going to make it as a store now, you need 2 things - service and prices. Sorry to say, as a stock holder and customer, JCP no longer has either. The clerks barely speak english and are rude as a rule, WHEN you can find one, and the prices are no longer competitive. Wake up! We are now competing with the internet - if we don't want service we will go online. Very sad from the day my Mom worked there for 40 years, and customers came in and asked for her, and waited for the days she was working - she knew the whole store, and all the merchandise. Because of her age, they harrassed her till she left. They replaced her with younger, rude non American clerks. I guess you get what you pay for. She had the last laugh in the end.
Nov 9, 2012 1:25PM
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My usual spending per year at JCP = 1800.00; since their transformation, I've spent 14.00.  Hmmm, ya think they lost my business. 
Nov 9, 2012 12:47PM
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Time to boot the CEO of Penneys?  Yeah, and don't forget to give him his BIG BONUS before booting him.
Nov 9, 2012 1:36PM
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Penny's is over just like Sear's and every other great American company because when all you care about is money and not the quality of you product or customer service this is what you get. Everything in Pennys is from China and it is junk just like every other deparment store, why can't we just mail order from China it would be cheaper.

 

And let's not forget what they pay their employees, they pay them so little they can just afford the car and gas to get to the store, more money for the CEO's so they can take home 20 million and they run these stores into the ground and walk away, what a great system. It will never change because there is no way to change it

Nov 9, 2012 1:32PM
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I stopped off a JCP night before last.  Couldn't find a men's cardigan sweater and women's socks.  Can you believe it - no socks!!! I had to pick up an online order.  No pick up place anymore.  You have to go to a register.  Wait in line FOREVER and then wait FOREVER for someone, anyone, to try to find it.  Can we please have the old JCP back?
Nov 9, 2012 1:30PM
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The new store concept "sucks".  You walk and and can't find a thing... not to mention a register or any personnel to assist you. 

 

I went to return an item I had ordered online and spent 20 minutes roaming the store to find someone to help process the refund for me.  There was no one upstairs in the "Customer Service" area where you pick-up orders placed online.

 

I couldn't find one register in any of the ladies' departments, only the normal men's section when I walk in and then one register upstairs in the Kid's Department.  There isn't even a register located any longer on the lingerie section.

 

Unless they change back, I don't think I'll EVER shop there again.

Nov 9, 2012 1:31PM
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I too am a loyal, or I should say I WAS a loyal JCPenney shopper. I live in an area where they just closed down a 3 floor store and opened at another location in the same mall, only as a one (1) floor store.  Each department has been reduced in size, as well as the amount of merchandise.  They stopped selling the brands I went to the store to buy, and now this "new" store is like shopping in a warehouse. And the quality of the merchandise is so much less than what it was, even on their own Worthington brand.  Not only have they stopped selling better clothing brands, the beauty shop has stopped selling some popular brands of hair products. Now, instead of being my first stop for holiday shopping, they'll be somewhere much lower on my list.
Nov 9, 2012 1:19PM
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Stick a fork in JC Penney.  They are done!
Nov 9, 2012 1:22PM
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Formula for success: Lay a bunch of people off, and outsource everything in sight. It's the American way to breast-feed the stock holders!
Nov 9, 2012 12:48PM
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Maybe Eddie Lampert can buy JCP and turn it around the same whay he did for Sears!!
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