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 1:33PM
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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 1:33PM
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For 38 years most of my curtains, bedroom textiles, clothing (4 children), my and husbands work clothes and more came from Penny's. I estimate average of  $20+ a month for all that time.  I bought washable curtains 2 years ago that lost all shape and lining stuck together the first time I washed them.  Store did not give credit or anything because year was up. The past 2 years the jcp brand quality has lowered and the claim of lower prices does not hold up when the same brands can be purchased elsewhere at better sale price PLUS  20% or more coupons.

 

Yesterday I shopped with my $10 coupon and looked for sweaters and jeans for husband.  Ended up with a $14 sale price on a necklace for myself as I say nothing else I wanted. I did the same with last coupon...the store made $0.36 on that pair of earings!

 

I rarely bother to look any more

Nov 9, 2012 1:33PM
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What were they thinking would happen when they remade a store built on the authentic family into one catering to faux families constructed so as to lend an appearance of respectability to sexual depravity?

 

Epic Fail!

Nov 9, 2012 1:33PM
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What's the big deal in running up losses.?  We just re-elected a guy who ran up 6 trill in new debt, sank over 90 bill into "green" energy companies, of which most have failed, has the jobless rate WAY up, has the amount of people on food stamps up 14 mill to 46 million people, has more single mom's than ever on welfare and over a million fewer women working.  Everyone said:  Just give the guy more time to fullfill his vision for our country.  JCP and it's stock holders just need to give this guy more time.  He obviously has a vision for JCP, who cares about track record and past results or the lack there of, why should that stuff matter..  Afterall, he means well...
Nov 9, 2012 1:33PM
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I was a faithul Jc Penney shopper but I too feel that the stock is really low and the choices limited.  They have never been great at customer service so that along with a failed "new look" keeps me out of their store.  I do not like the "shop within a shop" idea.  If I am looking for a black cardigan I don't want to search through 4 different brand sections to find one!  I am not brand loyal, I buy what I like no matter what the tag says.  The brand tag, I mean.  The price tag has to have a good price on it, prices have gone up even tho' they keep saying they haven't.
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?
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the Morons don't think advertising works look at walmart you DOLTs advertise your self to save your azz ......Ettes  and I have to say I have not seen a JCPENNEY advertisement in a few years 
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 1:30PM
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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 1:29PM
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Another causalty at the benefit of Wal-Fart.  Wake up people and support an American business rather than a company that buys their products from China and India.

Nov 9, 2012 1:27PM
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 JCP doesn't seem to understand that customer service and self-service are not one-in-the-same. And that they need to have a good selection of merchandise displayed clean and neat at a realistic price, plus adequate knowledgable staff. Without that basic understanding (starting at the top) all their "vision and concepts" won't mean diddly.  Glad I got rid of their stock a couple years ago. There are much better shopping choices out there, I can't waste my time with JCP.
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.
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.

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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 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 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 1:24PM
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It's just not JC penneys fools SELL! SELL! Sell! you can't sail a ship thats sinking  
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 1:22PM
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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 1:21PM
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It's a shame really, I love JCP!  I was happy not to get stupid coupons anymore, the prices are still comparable and quite frankly is a better quality than other discount stores like Kohls or Sears.  I hope they get their act together in the 4th quarter.  I'd hate to lose them like I lost Foley's down here in Texas!
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