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 1:20PM
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I’ve been waiting for this my whole entire life! Burn baby Burn! Better cash out while you can, while there’s still something to be had! Every man for himself ships going down quick!

Nov 9, 2012 1:19PM
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Stick a fork in JC Penney.  They are done!
Nov 9, 2012 12:53PM
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Yeah, it's time to forget the charade.  Let the company die the old-fashioned way and continue on the path they were going.  No need to unnecessarily excite staff and give them hope that there might be a future there.  I'm sure they are banking on some really huge severance packages anyway.  Seriously, that is one big ship to turn around in a year, let alone 5.  
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 12:48PM
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Maybe Eddie Lampert can buy JCP and turn it around the same whay he did for Sears!!
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 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 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 12:31PM
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Prices up, quality down--don't shop there anymore!
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