Can Apple's business model save JC Penney?

A new CEO hopes some tech-world experience will help him reimagine the struggling retailer.

By InvestorPlace Nov 16, 2011 11:21AM
By Jeff Reeves, InvestorPlace.com


Ron Johnson is the new J.C. Penney (JCP) chief executive officer, taking the reins of the iconic retailer on Nov. 1. And if his recent comments to analysts are any indication, the new CEO is looking to draw heavily on the big ideas from his days at Apple (AAPL) to breathe new life in to the struggling department store.


You might think iPhones have little to do with selling housewares. But to hear Johnson tell it, it's all about the mind-set and how a company approaches its customers. In a conference call, there were plenty of distinctively Apple-esque phrases used -- "reimagine," "think differently" and "work creatively," to name a few.


Of course, judging by J.C. Penney's significant fiscal-third-quarter loss, some innovation might be sorely overdue. Outlet store closures, early retirement plans and other restructuring resulted in big one-time expenses. But even without those charges, a 5% sales decline shows J.C. Penney has plenty of other bad news.


And let's not forget that while JCP stock has stabilized, it is hardly on a growth curve. JCP shares are off an ugly 60% in the past five years.


But Johnson, the former retail chief of Apple Inc. who helped preside over iPhone launches at Apple stores nationwide, remains focused on the potential of the company and the power of connecting with consumers.


"I get more excited every day about the potential of J.C. Penney," he said.


A glass-half-full attitude is refreshing, and the enthusiasm Johnson exudes undoubtedly will help with morale -- at least in the short term. After all, it appears J.C. Penney has no where to go but up.


The retailer has been locked in a battle with retail rivals Macy's (M) and Kohl's (KSS) but seems unable to get a leg up. Macy's set the tone this earnings season with strong numbers and continued success with its effort to localize stores despite its massive footprint. Meanwhile, Kohl's saw success, thanks to exclusive product lines and big brand names.


J.C. Penney hasn't had much success, in large part because it can't figure out how to reinvent itself to connect with consumers with much less to spend.


Johnson hopes to change all that. He sees the changes others have made to carve out unique roles in retail, and he knows J.C. Penney has to follow suit or get lost in the shuffle.


That's why in addition to the philosophical musings about innovation and optimism, he has brought in Apple cohorts he can trust to get the creative juices flowing.


Daniel Walker joined J.C. Penney this week as the chief talent officer, overseeing all human relations, after holding the same position at Apple from 2000-04. But don't think Walker is just a techie -- he also held top HR positions at retailers Gap Inc. (GPS) and the now-defunct Lazarus Department Stores, which were rolled into the current operations of Macy's. That's a shrewd hire, because JCP gets not only Apple innovation but valuable retail experience in the HR office.


On top of Walker, Apple alum Michael Kramer will be the new chief operating officer at JCP effective Dec. 5. Though he was the CFO for Apple's retail sales from 2000-05, he has more than just Apple experience, with a current post at apparel company Kellwood Co. and also a stint at Abercrombie & Fitch (ANF).


Will the executive shakeup be enough to rejuvenate J.C. Penney? Maybe. There's a lot to be said for bringing in new faces when you're trying to put a whole new face on a brand.


But it remains to be seen whether the Apple alums can capture the same magic with Wrangler jeans that they caught with red-hot electronics. The reality is that unlike with relying on a single product that can be a game-changer like the iPhone, J.C. Penney will have to rebuild department by department and item by item.


If Johnson's optimism and drive to innovate last beyond this initial splash as a new CEO, JCP could indeed find its way.



Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.




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