J.C. Penney reports loss and plummeting sales in 1Q

“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

24 Comments

  1. 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.

    1. 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.

  2. 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.

    1. @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.

  3. “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’.

      1. 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.

  4. 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.

  5. 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.

  6. 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.

    1. 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.

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