Johnson, JCPenney Finally Stumble Into the Right Decision

by Alyssa Oursler | January 29, 2013 2:24 pm

Back in September, I wrote a quick little note to JCPenney (NYSE:JCP[1]). The basic message: JCP is being stupid[2]. The reason: sales.

As much as I appreciated the store’s noble attempt to save shoppers from sale gimmicks with its fair-and-square everyday low prices, I posed another possibility: that maybe the gimmicks are what we’re shopping for in the first place.

“We love having a comparative other to justify our decisions — something that makes whatever we’re buying seem cheap even if it really isn’t. Like … oh, I know don’t … a regular price vs. a sale price, for example? Just an idea.”

Fast forward a few months to Monday, when USA TODAY reported[3] that CEO Ron Johnson’s struggling department chain has taken such an idea to heart.

“The chain this week will begin adding back some of the hundreds of sales it ditched last year in hopes of luring shoppers who were turned off when the discounts disappeared. Penney also plans to add price tags or signs for more than half of its merchandise to show customers how much they’re saving by shopping at the mid-priced chain.”

My first thought: Amen! Hallelujah! About dang time!

The second: I want to hurl.

This is indeed what we as shoppers want — to feel like we are discovering deals — and I don’t mean to sound ungrateful that JCPenney is finally heeding customers’ advice by admitting they messed up. But JCP didn’t just flip the switch — it has oozed into this position. In the year since the original strategy change, JCPenney has made a number of tweaks: adding the word “clearance” back into JCPenney’s vocabulary, or ditching a tier of its pricing pyramid, for instance.

Monday’s announcement, then, is just another step — and at this point (despite the market reacting with an 8% share lift), it feels like it came much later than it should have. Maybe even too late.

And the spin around it is almost nauseating.

For one, Johnson hasn’t explicitly admitted his original strategy was wrong. (Though it’s certainly implied when you stop doing one thing and go back to what you were doing.) No, instead, Johnson told The Associated Press last week that the latest moves are not a “deviation” from his strategy … but rather an “evolution.”

USA TODAY even reported it as if it were some kind of breakthrough, saying that displaying the regular price is “a strategy used by a few other retailers, such as home decor chain Crate and Barrel and the company (TJX Cos.) that owns TJ Maxx, HomeGoods and Marshalls.”

Using sales prices isn’t an “evolution.” It’s not rocket science, and it’s not a new idea. JCPenney used to let customers know how much they were saving. So make no mistake — while this is the right step, it’s absolutely a straight step backward.

These countless “steps” have resulted in a confusing dance for shoppers. We don’t know how long the current idea will last, or what the next idea will be. As Jeff Macke at Yahoo! Finance perfectly put it[4]:

“In the last 12 months under CEO Ron Johnson, JCPenney has stood for a little bit of everything. As a result the brand stands for nothing but a punchline.”

Maybe the only straightforward discount at JCPenney has been its shares, which have shed nearly half their weight in the past year. That’s to be expected when revenues can’t find any footing, profits have been absent for five straight quarters, and you’re expecting to report a substantial full-year loss of 85 cents per share.

While the company struggles to determine what it should call sales, it’s struggling to sell.

I should be happier to say “I told you so,” maybe more optimistic about JCPenney. But the seemingly rudderless way it slunk back to retailing normalcy doesn’t make me feel any better about the company’s fate.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  2. JCP is being stupid: http://investorplace.com/2012/09/dear-j-c-penney-dont-be-stupid-jcp/
  3. USA TODAY reported: http://www.usatoday.com/story/money/business/2013/01/28/j-c-penney-adds-sales/1871507/?utm_source=dlvr.it&utm_medium=twitter&dlvrit=110940
  4. Jeff Macke at Yahoo! Finance perfectly put it: http://finance.yahoo.com/blogs/breakout/sales-back-jcpenney-continues-confound-134552938.html

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