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Apple Guy Cries “Uncle” – In Face-Saving Language
JC Penney (JCP) Chief Executive Ron Johnson finally has learned that customers appreciate discounts. It only took $4 billion in lost sales to change his mind.
After insisting for the past year that shoppers would be won over – eventually -- by JC Penney’s new “everyday low pricing” strategy, Johnson now says the retailer will hold targeted sales, such as 20% off jewelry for Valentine’s Day, according to the Associated Press. The CEO called the about-face not a “deviation” but an “evolution” of his floundering strategy.
Investors who initially cheered the board’s decision to hire Johnson have drifted away from JC Penney as the company has seemed increasingly out of touch with its own shoppers, as reflected in a stock chart:
It was always a bad move to torpedo the coupon-reliant Penney business model, as we showed in this Dec. 11 Ycharts story.
But Johnson, whose formative retail experience involved persuading shoppers to drop hundreds of dollars at Apple’s (AAPL) glitzy stores, didn’t recognize his error until confronted with a full year of plummeting revenue. Analysts estimate JC Penney’s sales dropped 23% last year, or nearly $4 billion, to about $13.3 billion, according to the AP. Johnson’s decisions have accelerated a decline that began in 2008, and now annual sales would have to soar 50% to get JC Penney back to where it was five years ago, as this chart shows:
Meanwhile, one of Johnson’s big spring brand launches is in trouble, according to the New York Post. JC Penney was set to unveil a new line of Martha Stewart home goods, but with Martha Stewart Living Omnimedia (MSO) tied up in a lawsuit with Macy’s -- which accuses her of two-timing -- JC Penney is leaving her name off many products.
So far, Johnson’s visions for JC Penney haven’t survived their trip from the drawing board to reality. Investors may be wondering if he’s got a Plan B.
Amy Merrick, a contributing editor at YCharts, is a former staff reporter for the Wall Street Journal, where she spent 11 years writing about the Midwest economy, state and municipal finances, and the retail and banking industries. Her work has been published in the Poynter Institute’s Best Newspaper Writing series. She can be reached at editor@ycharts.com.
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