“J.C. Penney on Tuesday reported a larger-than-expected loss in the first quarter largely because customers were turned off by the retailer’s new plan to get rid of heavy discounting periodically throughout the year in favor of everyday low pricing,” Anne d’Innocenzio reports for The Associated Press. “The idea of the strategy, which was rolled out on Feb. 1, is to discourage shoppers from waiting for the nearly 600 sales Penney used to offer each year. But the move has backfired: It seems many faithful Penny customers have stopped shopping altogether.”
“The company, which is based in Plano, Texas, lost $163 million, or 75 cents a share, in the three months ended April 28. That’s down from a profit of $64 million, or 28 cents a share, in the year-ago period,” d’Innocenzio reports. “Revenue dropped 20 percent to $3.15 billion, below the penny loss on revenue of $3.45 billion Wall Street had expected. Revenue at stores opened at least a year — a figure the retail industry uses to measure a company’s health — fell 18.9 percent. That’s much steeper drop than the 11.4 percent drop analysts polled by FactSet had been forecasting.”
“Penney’s disappointing results are the first glimpse into how the bold pricing strategy is playing out with customers. They underscore how difficult it is for a company to fundamentally change the way customers behave. Industry watchers Penney’s has an uphill battle in attempting to shift the mindset of U.S. shoppers, who increasingly have become accustomed to and spoiled by fat discounts during the economic downturn,” d’Innocenzio reports. “The pricing plan is the riskiest move yet by new CEO Ron Johnson — a former Apple Inc. executive who started in November — to transform every aspect of the department-store chain from the brands it carries to the way it positions them in stores. Penney has said for months that it will take time for the pricing plan to work, but the poor results put more pressure on Johnson to convince investors that he’s on the right path.”
d’Innocenzio reports, “Investors had put a lot of faith in Johnson, who was the mastermind behind Apple’s successful retail stores and who also spearheaded the cheap chic strategy at Target in the 1990s. But they’ve soured on the plan recently. Penney shares soared 24 percent to about $43 after Johnson laid out his pricing strategy in late January. But since the middle of February — after the plan was rolled out in stores— investors have become increasingly nervous, sending shares back down to trade around $34. After the company reported its disappointing first-quarter results after the markets closed, Penney’s shares fell 12 percent to $29.30 in after-hours trading.”
Read more in the full article here.
MacDailyNews Take: We wouldn’t sell Ron Johnson short.
Related articles:
Why Ron Johnson left Apple to head JC Penney – April 30, 2012
J.C. Penney lures another executive from Apple – April 26, 2012
Steve Jobs’ ex-lieutenant Ron Johnson adds $1.5 billion to J.C. Penney in two days – January 30, 2012
J.C. Penney CEO Ron Johnson: What I learned building the Apple Store – November 21, 2011
New J.C. Penney CEO Johnson hiring former Apple co-workers – November 9, 2011
Why Apple’s retail genius Ron Johnson is paying for the privilege of running J.C. Penney – June 15, 2011
Apple’s retail store chief Johnson off to J.C. Penney; expected to become CEO within months – June 14, 2011
Agree. It will take some time. Also, JCP has just started upgrading its aging stores.
It’s stupid behavior that has to be overcome that Ron Johnson faces. See, shoppers like to spend a bunch of money and then be told as they check out, “You saved $223 today.”
Never mind that that they only “saved” the money because of how marked up the original prices were.
Convincing people that they will save money by shopping with you all the time isn’t an easy task because customers, in our naive way, always like to feel like we got the deal of the century.
Changing the “stupid behavior” of the stampede that is the American consumer, as a single entity, is like changing the behavior of the bulls in Pamplona by standing in the middle of the street with your hand outstretched, yelling “Stop!”. Someone’s going to get hurt.
I was looking forward to shopping there because of these changes.
I have not shopped at Penney’s for years, but I went back in last week to check out the changes.
The prices were decent. I like the prices at $7, or $30 or $40. No .99 crap.
I want to see what it looks like when they start rolling out the mini shops (or whatever they call them) in August.
I watched the investor meeting where Ron J. rolled out the changes. It made sense.
@thethirdshoe: Same here. I went into JCP for the first time in maybe 20 years SOLELY because of Ron Johnson. I like the new direction and, for the most part, the new ads. Give it time. It is certainly more inspired than anything going on at KMart, Sears or even WalMart.
I HAD to go in Walmart today. (looking for Diablo III Collector’s Edition)
I noticed they had some racks with the $10 pricing. Is this recent? I never shop at Walmart, so I do not know.
“Johnson, who was the mastermind behind Apple’s successful retail stores”
To be correct, the mastermind behind Apple’s successful retail stores was Steven Jobs. Obviously, with major input from Ron, but the idea itself to make stores, and to have them totally different that what people used to see, is Jobs’.
correcto mundo.
From what I have read, Jobs originally took a lot of convincing to allow the Apple Stores after Ron Johnson came up with the idea.
Jobs decided that Apple would build their own stores and brought Johnson to help with implementing the idea. Ron made major input in some important decisions, but the mastermind was obviously Jobs — from initial idea to nearly every detail, including design of staircases.
I didn’t even know this was their strategy. Now that I know this, I am more likely to shop there. It seems that they just need to get their message out; explain how customers will benefit from shopping there.
MacDailyNews Take: We wouldn’t sell Ron Johnson short.
From my experience he is wide and long.
Tim Cook
Not a fan of the ad campaign which communicated very little. But, it seems to me the first thing JCP needs is something that people want to buy that they can’t get a 1000 other places.
+1000
Put in an Apple store in their electronics section or at least where they sell TV’s. That might help.
Haven’t had a chance to visit the stores recently, and the everyday low (?) prices sounds good instead of discounts, but the TV ads absolutely SUCK. Sorry, that’s the truth. Creative ads are great, but they need to be about SOMETHING.
Janice, understand you’re not a fan of the ads, but to me, its marketing 101. Create buzz. No one has talked about JCP in years. Whle not every ad is about something specific, it is building a new image in the consumer’s mind about JCP and I think the entire campaign is very effective, although in the early stages. Change takes time. I’m thinking RJ will get there base on what I’ve seen so far, difficult quarter and all.
Rolled out Feb 1 and the morons on the street want to roll it up and throw it away. That ought to tell you how stooopid some who play in the market truly are.
It’s kind of like planting an Apple tree this spring and bitching this fall because there are no apples to eat.
I’d love to shop at JCP, however when I could go on at Sunday it’s totally over run with the Hispanic community and all 12 family members, 10 kids running all over the place out of control. I don’t blame JCP but it makes shopping miserable. I end up going to Kohl’s.
And their ethnic heritage has what to do with your point?
My take away is you don’t like shopping with hispanics? “over run” really? You go into a crowded store, see some brown folks and the store is “over run”.
Interesting terminology, you subtle little racist..
I have always liked JCP but hated the stupid sales approaches, like buy one, get second half off — but I only wanted one, so I walked away. I was in a store Sunday and love the new pricing strategy. Their quality is generally good, particularly the Stafford men’s brand, of which I have bought at least a half dozen shirts in the last year. Those shirts are now everyday priced at $15 and every bit as good as a Nautica shirt at $50 on sale. And the prices are clearly marked, unlike Kohl’s with their Kindle type pricing boards that are near impossible to read. As many have said, this new approach needs time and re-educated buyers — the latter is of course the challenge.
30 years ago I worked at JCP men’s dept. barely walked in the place after leaving.
I hated, HATED, the screaming commercials from earlier this year.
In spite of that, my wife went there a month ago and came back with a few new items she really liked and the prices were good. Two weeks ago I went to JCP to see what I could find in shoes… I walked out with two new pairs ordered another. One week ago I picked up the shoes I ordered and while walking by the men’s dept, stopped and ended up buying a coat.
Things have changed, so has my attitude to JCP. Guess I’ll be leaving more cash there from now on… But I still HATE those screaming commercials.
That strategy only works when you have a premium product that is only availabe through those channels. And it sure helps if there is high demand for it. So far there is little differentiation between JCP’s clothing and Target’s clothing and Sears clothing, and Kohl’s clothing, etc. ….