LaVonne Maupins's List: JC Penney-Obselete

• Posted   Friday, March 1, 2013,

  • fairly current article, 2 mths old
• • Henry Blodget says it may have been the worst quarter posted by any retailer ever
• JCPenney, the storied if unglamorous retailer, is in trouble. Big trouble. Fourth-quarter earnings results came out on Wednesday and they were terrible
• h a quarterly loss of $427 million
• meaning stores that were open this past quarter and also open in the same quarter of the previous year—fell by a mind-boggling 32 percent.
• • negatives to store, still unpleasant dept. store shopping experience. disorganized, clustered by funtional category, new wi-fi idea-slow and unneccessary
• JCPenney made a big splash in the retail world by hiring Ron Johnson, mastermind of Apple’s retail operations, as CEO.
• Instead of building on what the people who like JCPenney liked about JCPenney, he undertook a series of essentially arbitrary changes that alienated some without drawing anyone new in.

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  His now-infamous effort to wean consumers off their addiction to discounts by banning sales and coupons in favor of “fair and square” everyday pricing is a case in point.
• that seem geared to a cooler, younger, more urban audience than JCPenney’s traditional client base of somewhat square, lower-middle-class moms.
• There’s already a Target and an H&M in the same mall for those seeking a slightly hipper experience.
• But low staffing levels plus expansive floor space meant it was impossible to find help.
• As part of rebranding, signs encouraged me to shop at JCP.com (which just redirects to the old jcpenney.com URL) and then for some reason pick up my item at any register—but it wasn’t clear where any staffed registers might be.

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•   Feb. 28, 2013, 10:07 AM      |
• So far, this "transformation" is only a "transformation" in the way that the demolition of a building is a "transformation."
• Retail stores have enormous fixed costs--rent, inventory, people--and they usually operate at very thin profit margins.

• As a result, with even a much smaller revenue drop, stores that might contribute meaningful operating profit to a retail chain suddenly become money-losing lead weights.

   

• And when a company has finite resources, the way JC Penney does, these stores cannot remain money-losing lead weights for long, or else the company will go bankrupt.

   
• t is possible that JC Penney just reported the worst same-store sales decline of a major retailer in industry history.
• Retail chains simply do not report results like this unless they are in deep distress.
• They can't report results like this, because they can't survive if they do

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• iants like Kohl's (KSS) and Target (TGT) were dominating the retail apparel and household goods markets, J.C. Penney sales and earnings were lagging.
• At the beginning of 2012, J.C. Penney (JCP) was almost an afterthought in the retail world.
• One of the main features of the strategy was to eliminate event-driven "sale" pricin
• . Johnson felt that these things drove temporary traffic from people looking for a good deal but didn't build any lasting customer loyalty. In its place, Johnson established its "lowest price" campaign whose goal was to sell merchandise every day for sale-level prices so customers wouldn't have to wait for a sale event.
• While initial reaction and results to the plan were encouraging, it proved to be nothing more than a temporary boost to the bottom line. It's been over a full year since Johnson announced his turnaround strategy and to say that things haven't gone his way would be an understatement. The recent news has gotten worse and it may be time to acknowledge that J.C. Penney is now a company on the brink of failure
• Same-store sales are down 32% in the 4th quarter
• Johnson's strategy that was supposed to drive sales and expand its customer base has tanked magnificently. How did this happen? The simple answer is that the J.C. Penney strategy does nothing more than compete on price.
• The "low price all the time" strategy ultimately ends up just driving deal seekers through the front door and once they're able to find a better deal somewhere else they'll just walk right back out the door again. There's really nothing about the J.C. Penney shopping experience that differentiates itself from any other big box retailer.
• The company continues to make massive layoffs
• 300 headquarter jobs it cut last month, another 1000 layoffs it announced in January and the 8000 employees it let go last year. Clearly, this is a company
• liminate almost 1500 jobs from the bottom line.
• trying desperately to control costs and improve cash flow.

• It's burning through cash
• concept where each store contains several product-centric mini-shops within. The problem is that J.C. Penney is using a lot of its available cash to make it happen. If the shop-in-store concept isn't successful or J.C. Penney has difficulty getting the concept into most of its stores, its balance sheet could ultimately be left with precious little flexibility or resources for the future.
• strategy is to rebuild many of its retail locations with its "shop-in-store
• Insiders are getting out
• J.C. Penney board member Steven Roth added fuel to the fire earlier this month when it was announced that his Vornado Realty Trust (VNO) had dumped 10 million shares of J.C. Penney stock.
• While Vornado still owns 6% of J.C. Penney, this move is a clear signal that investor patience (as well as the Board of Directors' patience with Johnson) may be starting to run low. Penney stock dropped over 10% on news of the sale.
• It's already backtracked on their strategy by offering sales again

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• he board of J.C. Penney Co Inc is facing scathing criticism from investors and corporate governance experts after ousting Chief Executive Ron Johnson and replacing him with his own embattled predecessor, Myron Ullman.
• Shares tumbled 10.3 percent at $14.23 in early Tuesday trading.
  
• LIMITED EXPERIENCE
  
  That board reflects the company's Texas roots more than its retail operations. Four directors are or were executives of Texas-based institutions. Aside from Ullman, only one board member has direct retail experience - Leonard Roberts, the former CEO of electronics chain RadioShack Corp. The rest come from consumer products, airlines, media and manufacturing sectors, among others.
  
• The board said in a statement it picked Ullman because he was well-positioned to
• move quickly and improve sales, but Ullman himself conceded in an interview that the change was so new he did not yet have a plan.
• company's cash position.
• Penney ended the last fiscal year with less than $1 billion in cash,

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• CASTALDO J. SAVING JC PENNEY. Canadian Business [serial online]. April 29, 2013;86(7):11. Available from: Academic Search Complete, Ipswich, MA. Accessed May 19, 2013
• CASTALDO, J. (2013). SAVING JC PENNEY. Canadian Business, 86(7), 11.
• 4/29/2013,

• RETAIL THERAPY

    

  The troubled U.S. chain turns to Canada's Joe Fresh for help

   
• Last year, the company lost US$985 million and saw more than half of its market value vanish.
• CEO Ron Johnson,
• To help fix this sad situation, the chain is betting on Canada -- more specifically Canadian apparel maker Joe Fresh, owned by Loblaw Cos. -- to bring customers back to its stores.
• was recently booted -- in favour of the man he initially replaced.

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• Can Y&R, George Soros right the JC Penney ship?. Advertising Age [serial online]. April 29, 2013;84(17):1. Available from: Academic Search Complete, Ipswich, MA.
• Can Y&R, George Soros right the JC Penney ship?. (2013). Advertising Age, 84(17), 1.
• By bringing on a big Madison Avenue agency,

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