The deal would reportedly keep 650 stores open and save 70,000 jobs
Two major shopping mall owners, likely alarmed at the possible liquidation of JCPenney stores that serve as mall anchors, have stepped in to buy the bankrupt retailer, according to a law firm handling the deal.
An attorney for Kirkland & Ellis says Simon Property Group and Brookfield Property Partners are putting the final touches on their offer of $800 million for the chain that declared bankruptcy in May after the coronavirus (COVID-19) pandemic sent its already-declining sales into a freefall.
Attorney Joshua Sussberg told a court hearing that the rescue package will keep JCPenney operating in 650 stores and save about 70,000 jobs.
The complex deal will give some hedge funds that loaned money to the retailer ownership of some JCPenney assets, including select stores and distribution centers. In return, the department store chain will be relieved of some of its $5 billion debt obligation.
Also part of the deal, Wells Fargo will extend a $2 billion credit line, leaving JCPenney with a significantly smaller debt load and about $1 billion in cash.
Previously, Sycamore Partners, parent company of Belks, was seen as a potential buyer. In July published reports suggested Sycamore Partners would purchase JC Penney and merge some of its stores with the smaller chain.
When it declared bankruptcy in May, JCPenney said it would close some of the 846 stores it had at the time. The potential loss of all JCPenney stores was viewed as an existential threat by the shopping mall industry, already suffering huge losses in foot traffic and dependent on its anchors, like JCPenney, Macy’s, and Sears to attract shoppers.
The shift to online shopping during the pandemic has only made malls’ position in the marketplace more precarious.
A report in PYMNTS.COM in April summed up the problem for shopping malls, whose problems had suddenly been made worse.
“Part of it is the public psyche,” University of Maryland marketing professor Jie Zhang told the industry publication. “This virus is likely not going to go away any time soon, and the one type of place where people will be much more vigilant about avoiding in the longer term will be those crowded, enclosed spaces. And that’s exactly what traditional shopping malls are.”
Sussberg told the court the deal took a while to complete because of the large number of players and their competing interests. The sale proposal will be presented to the bankruptcy court for final approval.
Two major shopping mall owners, likely alarmed at the possible liquidation of JCPenney stores that serve as mall anchors, have stepped in to buy the bankrupt retailer, according to a law firm handling the deal.
An attorney for Kirkland & Ellis says Simon Property Group and Brookfield Property Partners are putting the final touches on their offer of $800 million for the chain that declared bankruptcy in May after the coronavirus (COVID-19) pandemic sent its already-declin...
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J.C. Penney announces partnership with secondhand retailer ThredUp
As part of its effort to boost sales and foot traffic, J.C. Penney will add ThredUp shops to some of its stores
J.C. Penney, which has been forced to close many of its stores due to disappointing sales in recent years, reported smaller losses in the second quarter, as well as a new partnership with secondhand retailer ThredUp.
The retailer reported a loss of $48 million in the second quarter compared to a loss of $101 million a year earlier, according to Refinitiv. However, revenue was lower than analysts’ expectations of $2.69 billion -- $2.62 billion compared to $2.8 billion a year earlier.
J.C. Penney and other struggling retailers have been changing their business plans in an attempt to increase foot traffic, which has declined under a sharp increase in online shopping.
Earlier this year, J.C. Penney announced it would be ceasing sales of appliances and furniture and closing 24 stores as part of its course-correction plan. The decision to free up space in stores by removing appliances and furniture was intended to help it "better meet customer expectations, improve financial performance and drive profitable growth."
Now, the retailer will be carving out space for ThredUp shops at 30 of its stores, which may draw in younger consumers with an interest in sustainable fashion.
A new in-store experience
“With the rise of online resale markets, there’s no doubt that demand for great value on quality brands is at an all-time high,” said J.C. Penney EVP and chief merchant Michelle Wlazlo during a second quarter conference call. “We’re excited about the prospect of creating a new in-store experience that makes high-end brands attainable, as well as catering to eco-minded consumers who want more sustainable options in their wardrobe.”
J.C. Penney CEO Jill Soltau said she feels “more confident than ever” that the changes the company is undergoing will “reinvigorate and rejuvenate this great company to sustainable, profitable growth."
“We are not simply running a business; we are rebuilding a business,” Soltau said. “The journey we are on will restore health back to our company.”
Macy’s also announced this week that it’s teaming up with ThredUp to offer secondhand women’s clothing and handbags at some of its stores.
J.C. Penney, which has been forced to close many of its stores due to disappointing sales in recent years, reported smaller losses in the second quarter, a...
J.C. Penney to close more stores due to poor performance
The retailer is looking to its new CEO to turn things around for the company
J.C. Penney announced Thursday that it plans to shutter 24 stores this year -- 15 of its department stores and nine home-and-furniture locations -- due to disappointing sales.
The retailer said the stores that are slated to be shut down “represent a real estate monetization opportunity.” The chain hasn’t yet released a list of stores that will close.
"Comparable sales performance for the closing stores was significantly below the remaining store base and these stores operate at a much higher expense rate given the lack of productivity," J.C. Penney said in a statement.
"Associates who will be impacted by the store closures will receive separation benefits, which includes assistance identifying other employment opportunities and outplacement services, such as resume writing and interview preparation."
In January, the company announced that it would be closing three of its full-line stores due to poor performance. The following month, the retailer said it would stop selling major appliances in its stores starting February 28 in an effort to "better meet customer expectations, improve financial performance and drive profitable growth."
Course correcting amid online competition
J.C. Penney and other brick-and-mortar retailers have been modifying their business strategies in an effort to align with changing consumer preferences to compete with online shopping channels such as Amazon.
“It is essential to retain those locations that present the best expression of the JCPenney brand and function as a seamless extension of the omnichannel experience through online order fulfillment, same-day pick up, exchanges and returns," Marvin R. Ellison, chairman and CEO, said in a statement at the time.
Just recently, J.C. Penney rival Sears narrowly avoided Chapter 11 bankruptcy after it was purchased through the hedge fund of chairman and former CEO Eddie Lampert. However, falling foot traffic and declining sales have forced Sears to close hundreds of locations in recent years.
J.C. Penney is looking to recently appointed CEO, Jill Soltau -- who approved the company’s decision to stop selling appliances and furniture -- to move the chain in a positive direction, and fast.
"The future trajectory of the company will be down to her and success relies upon decisive action with a firm focus on the shopper," Neil Saunders, managing director of GlobalData Retail, told USA Today. "Our main concern is that JCP has very little time to course correct. The business needs to move at pace and without any missteps – a tall order in today’s complex and fast-moving retail environment."
J.C. Penney announced Thursday that it plans to shutter 24 stores this year -- 15 of its department stores and nine home-and-furniture locations -- due to...
The company hopes to breathe new life into business by incorporating more home products
JC Penney has been struggling as of late. Fresh on the heels of its attempted recovery, the New York Post reported that the company eliminated jobs and froze overtime due to “unexpected light sales” in April.
Now, perhaps in another attempt at reinvigoration, Penney’s is getting into the business of selling appliances. This July, the company will begin rolling out appliance showrooms at nearly 500 locations.
The showrooms (as well as jcp.com) will include kitchen and laundry appliances from Samsung, LG, GE Appliances, and Hotpoint.
Aligns with consumer spending
The decision to incorporate home products and an appliance showroom was a strategic one. According to JC Penney’s chief executive officer, Marvin R. Ellison, the decision was based largely on opportunities afforded by the current housing market.
"The current housing market presents a lucrative opportunity to diversify our Home assortment and strategically align with consumer spending patterns,” Ellison said in a statement. By ramping up its Home department, the company hopes to connect with families and become a destination for home products.
Ellison also hopes this move will help “weather-proof” the company during seasonal periods of the year and increase its revenue per customer.
Partnerships with other companies, such as Empire Today and Ashley Furniture, will be tested to determine whether they warrant inclusion in more stores and markets. By the end of 2017, the company hopes to achieve $1.2 billion in earnings before interest, taxes, depreciation and amortization (EBITDA).
This isn't the company's first foray into the world of home furnishings. At one point in time, the company was credited with covering one-third of the windows in America.
JC Penney has been struggling as of late. Fresh on the heels of its attempted recovery, the New York Post reported that the company eliminated jobs and fro...
Once considered retail roadkill, J.C. Penney rises from the ashes
Latest earnings report suggests "back to the future" strategy has worked
J.C. Penney, a retailer once left for dead, is turning heads on Wall Street, perhaps because it has regained the respect of consumers on Main Street.
The proof was delivered in the company's fourth quarter and full-year earnings report late Thursday. Comparable store sales grew 4.1 % for the fourth quarter and 4.5 % for the full year.
The company said the combination of strong sales growth, better profit margins, and disciplined expense reduction resulted in full year adjusted earnings of $715 million, a $435 million increase.
"We are very pleased with our performance for the fourth quarter and full year,” J.C. Penney CEO Marvin Ellison said in a press release announcing the earnings. “Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment.”
Disastrous makeover recovery
Ellison probably has every right to be pleased since the company suffered what can only be described as a disastrous makeover and customer revolt just four years ago. For those who don't recall those events, here's what happened.
At the urging of activist board member Bill Ackman, J.C. Penney at the beginning of 2012 abandoned its long tradition of serving a middle class, middle aged, and middle-of-the-road consumer. The company hoped to replace that J.C. Penney customer with one who was younger and cooler.
It changed its brand to JCP and launched its offensive with the TV commercial below, which few people understood but old J.C. Penney customers universally hated.
Complaints from long-time Penneys customers poured in to ConsumerAffairs.
"This is the worst ad of all time, stop it immediately," wrote Kathy, of Hillsboro, Ore. "We will boycott J.C. Penney until it offers an apology to all its customers!"
"I am complaining about the obnoxious television commercial aired announcing your new pricing campaign," wrote Carole, of Lakewood, Calif. "It has to be one of the most irritating, annoying commercials ever created for television. If you think this will make anyone shop at your stores, you are mistaken as far as I'm concerned.”
What Kathy and Carole didn't understand was that the ad was probably designed to evoke that reaction in them. To many industry observers, Penneys appeared to be firing its customers, with plans to replace them.
The old customers left, but the hoped-for new ones didn't arrive, at least not in the necessary numbers. Just over a year later, amid mounting losses, J.C. Penney went back to the future, reinstalling its former CEO and returning to many of its previous pricing and operational policies.
Enough of its customers have returned that the company now appears to be back on its feet. In fact, it's doing better than some of its rivals like Macy's and Sears, that have struggled in the increasingly tough retail environment.
J.C. Penney, a retailer once left for dead, is turning heads on Wall Street, perhaps because it has regained the respect of consumers on Main Street.Th...
But while investors may be unhappy, consumer complaints have died down
A San Diego law firm has filed a class action suit against J.C. Penney, accusing the beleaguered retailer of federal securities fraud.
The action, submitted by Robbins Arroyo LLP, alleges that the company and certain of its officers violated the Securities and Exchange Act of 1934. Specifically, the suit focuses on events of September 27, when Penney's stock suffered a huge one-day loss.
Previously, the company had announced it was issuing additional stock, using the proceeds to fund operations through the end of the year.
The suit claims that was a misrepresentation. In fact, it says the company would have insufficient liquidity to get through year-end and would require additional investments to make it through the holiday season. The suit further claims Penneys was concealing its need for liquidity so as not to add to its vendors' concerns.
The suit says a September 26th analyst's report found the company would need to take on additional debt to ensure that it had enough cash to keep its business operations going. The following day Penney's common stock fell 13% on the New York Stock Exchange.
While the suit seeks to sign up unhappy Penney's stockholders, the heavy stream of complaints from unhappy consumers – so prevalent beginning with Penney's radical make-over in early 2012 – seems to have died down. A recent Penney's review at ConsumerAffairs, from a young bride-to-be shopping for a ring, was positively glowing.
“Other jewelry retailers and department stores just didn't have what I wanted, and they definitely didn't offer much when it came to prices,” wrote Jamie, of Broken Arrow, Okla. “I found my ring after taking my mom's advice to check JC Penney's site, and there it was! The ring was unique but somehow still classic in style, it was of excellent quality, and it was totally affordable. I showed my fiancé and, needless to say, a few months later I was wearing the ring and planning our wedding! At the proposal, it was the first time I had ever seen my ring in "real life" and it was even better and sparklier (sic) than I had imagined. He was even able to get it on sale and afford the lifetime care package! I have never been happier and I love my ring so much.”
A year ago the retailer was getting very few positive reviews as consumers objected to the change in course the store had taken under new CEO Ron Johnson, a former Apple executive installed at the urging of major board member Bill Ackman.
"Ackman officially exits stage left, having brought an American retailing icon to its knees," Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, wrote in a note to clients in August.
In January 2012 J.C. Penney, which had steadily been losing money and had the reputation as a rather conservative and stodgy retailer, attempted to remake itself as younger and hipper, hoping to pull customers from Target and other more contemporary retailers. In the process, they managed to alienate – some analysts think by design – the core J.C. Penney customer base.
The old customers didn't like the new pricing structure, which did away with sales and coupons. It didn't like the make-up of the stores, which jettisoned traditional brands and turned over floor space to vendors for kiosks. The old customers left and the new customers never showed up.
Now the old J.C. Penney is back, doing things the way they did before. Will it be enough to save the brand? Perhaps it's too early to tell.
But the fact that the store gets an online review from a happy consumer – and a young one at that – has got to give the retailer some hope.
JC Penney sued on behalf of investorsA San Diego, Calif., law firm has filed a class action suit against J.C. Penney, accusing the beleaguered retailer o...
Troubled chain dumps the last vestige of its disastrous makeover -- its "jcp" logo
You've got to give JCPenney credit -- it isn't afraid to try new things. And when those new things turn out to be unmitigated disasters, it isn't afraid to swallow hard and admit its mistake.
The struggling retailer lost nearly a third of its customers last year as it tried to freshen up its image, so now it's launching a new series of ads urging customers to come back, and perhaps the most noticeable thing about the ads is that they dispense with the "jcp" logo that ousted CEO Ron Johnson introduced and return to a simple JCPenney logo.
Johnson's strategy was to attract hip younger shoppers to replace the loyal, perhaps slightly ordinary customers who had kept the company afloat for decades. It was partly successful: lots of older customers bailed out but the hipsters were nowhere to be seen.
Johnson's biggest brainstorm involved getting rid of the frequent sales and promotions that JCPenney had previously featured. The chain is now reinstating sales, promotions, coupons and so forth although it is somewhat hampered in doing so since it burned through most of its cash during Johnson's tenure.
Mark up, then mark down
It's also hampered by the logistics of going back to the old way of doing things. During Johnson's era, there were fewer sales and markdowns. To get back to doing markdowns requires jacking up the Johnson-ear prices, as this customer, "S" of Great Meadows, N.J., discovered:
"Yesterday in the Rockaway Mall in Rockaway, NJ, I purchased a beachwear garment that had a sticker over the original price on the tag which showed the new price at $32. When I checked out, I was informed it was on sale for $24, which I paid.
"When I got home, I peeled the $32 price sticker off the tag which revealed the original price underneath the sticker was $20! So JCP, you raised the original price and then put it on 'sale' for $4 more than the original $20 price! A bit unethical, wouldn't you say!" S said.
Or as retail industry analyst Dr. Robert Passikoff put it in a recent ConsumerAffairs guest column: "They're going to raise the prices and then -- wait for it -- lower them, figuring that will give them the appearance of having provided consumers with a large discount at a sales event, so it will appear even more special and of greater value to customers. So, all in all, not so fair-and-square and really fake prices."
It's no secret
In its unusually frank ad, JCPenney admits its mistakes.
"It's no secret. Recently JCPenney changed," the ad says. "Some changes you liked, and some you didn't. But what matters with mistakes is what we learn. We learned a very simple thing: to listen to you. To hear what you need to make your life more beautiful."
JCPenney frankly admits the error of its recent ways in the ads and openly begs customers to come back, closing with this rather urgent appeal:
"Come back to J.C. Penney. We heard you. Now, we'd love to see you." it says.
You've got to give JCPenney credit -- it isn't afraid to try new things. And when those new things turn out to be unmitigated disasters, it isn't afraid to...
The brand had low customer engagement to start with now it's even worse
In 2000 the average tenure of a CEO was 10 years. In 2008 it was down to 8 ½, signaling a slightly higher degree of corporate and brand accountability by boards and shareholders. Bet you Ron Johnson, the now former CEO of JCPenney wishes the retailer had a Time Machine Department about now. He only lasted 17 months.
We can't imagine that anyone is surprised. The results of his efforts were dismal. Grim. jcp (Mr. Johnson modernized the name and logo) lost $552 million in the 4th Quarter, nearly a billion dollars for the year, and sales fell nearly 29% versus a year ago. Oh, and JCPenney shares lost half their value during Mr. Johnsons tenure. So really, really grim.
Mr. Johnson got rid of sales, instituted low-price guarantees, got rid of brands, got rid of fake prices, negotiated for new brands, brought back sales and coupons, planned to redesign stores, and then brought back fake prices. None of which worked. To paraphrase Yogi Berra, who apparently knew as much about department store retailing as Mr. Johnson, if the customers don't want to come to the store, you can't stop em.
A tough business
Nobody would deny that retailing has gotten tougher in the past few years, but equally so, brands have learned that if they can create some degree of emotional engagement (in addition to the rational stuff like Merchandise Range, Fair Pricing Strategies, and Customer Service), they are bound to see positive behavior toward the brand. And yes, it's gotten harder for retailers to provide meaningful and engaging differentiation as regards their brands.
But equally so, it's axiomatic that if customers behave more positively towards you, you ought to see positive results to your bottom line. But to do that you need to have something that customers can engage with. We wont go into all the reasons consumers engage with Apple. That would be preaching to the choir. Mr. Johnson apparently thought JCPenney and Apple were on equal planes when it came to emotional engagement, and boy, was he wrong!
According to our 2013 Customer Loyalty Engagement Index, when it came to Department Stores, overall engagement levels (versus a category Ideal, calculated to be 100%) were pretty close:
But not for JCPenney. Their engagement rating according to their own customers was 70%, which is low in any category, but very low in Department Store Retailing.
Anyway, JCPenny announced that Myron Ullman, who had been CEO until Mr. Johnson was brought in will be coming back. In a seven year period when Mr. Ullman was in charge shares were down 15%, so about 2% a year, which is a lot better than 50%.
Talk about cutting your losses! --- Robert Passikoff is President of Brand Keys, a research consultancy.
Robert PassikoffIn 2000 the average tenure of a CEO was 10 years. In 2008 it was down to 8 ½, signaling a slightly higher degree of corporate an...
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By Robert Passikoff
J.C. Penney ousts CEO, brings back his predecessor
New strategy successfully chased away old customers but didn't attract new ones
Well, it seemed like a good idea at the time. J.C. Penney was a respected brand with millions of loyal customers but, like every company, it was hoping to find a way to jazz up its image and grow a little bit.
So it looked to one of the world's most successful companies -- Apple -- and poached Ron Johnson, who had built Apple's successful chain of retail stores.
Johnson promptly embarked on a drive to rid Penney of its old customers by getting rid of the sales and coupons they had come to expect. He also jettisoned many of the brands and lines of merchandise Penney's customers were accustomed to. Instead he imposed a new pricing strategy no one quite understood and introduced hip new lines of merchandise.
The strategy was at least partly successful. The old customers went away. Angrily. But the new, hip consumers? Judging from the empty stores, they failed to get the message.
"Today I went to the Mall, straight to Penney's. It's been a while since I've been there. I usuallly buy bagfuls of clothes there. First the store was bare. I'm 58 yrs old and all I see is Junior stuff," said Bonnie of Chesapeake, Va., a few days ago, in a ConsumerAffairs posting. "There is no more Worthington, no more St Johns Bay, and the aisles have mannequins with tiny dresses on.
"All I can say is I will never return. The clothes look small, ugly and cheap. What a shame. I'm so sorry the old J.C. Penney's is gone," Bonnie said.
And so, after a stunning quarterly loss of half a billion dollars, the J.C. Penney board undertook a review of its new CEO's innovative policies, and did not like what it saw.
After 17 months of declining sales and punishing losses, the board ousted Johnson and brought back his predecessor, Myron Ullman.
So everything will be fine now? Don't count on it. A lot of damage has been done and hundreds of millions of dollars thrown away. Whether Ullman or anyone else can get J.C. Penney back on its feet is anyone's guess.
Too little, too late
To his credit, Johnson recognized that his strategy was not taking hold but by then it was too late. "It was clear that withdrawing from our promotional model to a more everyday model has been harder than we anticipated," he admitted a few weeks ago.
Johnson embarked on a desperate attempt to turn things around by laying plans to revert to the old pricing policy, a move that brought harsh condemnation from marketing gurus, including branding consultant Robert Passikoff. Writing recently for ConsumerAffairs, Passikoff put it this way:
"They're going to raise the prices and then -- wait for it -- lower them, figuring that will give them the appearance of having provided consumers with a large discount at a sales event, so it will appear even more special and of greater value to customers. So, all in all, not so fair-and-square and really fake prices. If you are as dumbfounded as we, join the club."
For this part, Ullman said he had not yet worked out what his recovery strategy would be. ""I wouldn't recommend that we go back to the way J.C. Penney was when I left. Things change," he said, according to the Wall Street Journal. But, he added, "There's no reason to try and alienate customers who want to try and shop at J.C. Penney."
Well, it seemed like a good idea at the time. J.C. Penney was a respected brand with millions of loyal customers but, like every company, it was hoping to ...
Higher prices at JC Penney means lower prices at jcp
If you raise prices and then lower them, that should make everybody happy, right?
There's a wonderful Yiddish reflection -- "The difference between genius and stupidity is genius has its limits." That may explain the difference between Apple stores and JCPenney/jcp. What's interesting is the strategies for both retailers were set by the same person -- Ron Johnson, formerly SVP, Retail Operations for Apple, currently jcp CEO. It was JCPenney when he joined and announced his long and short-term strategies.
Long term: re-do all of the stores in the 111-year-old chain into mini-boutiques-under-one-roof, which sounds really cool, but, alas, to do that you need time and money and jcp is running out of both. Short-term: a plan that was going to reinvigorate the store and restore profitability, stop what Johnson labeled fake prices, and move away from nonstop promotions and coupons with everyday low prices (like Wal-Mart) to fair-and-square pricing.
The change didn't work all that well, but in their defense, the Ellen DeGeneres commercials were fun. Until they cancelled the advertising and strategy, neither of which was working, and the regular sales, that Mr. Johnson had characterized as simplifying pricing. If that seems contrary to the previous fair-and-square positioning, we think that's a perfectly acceptable position for you to take, so go ahead.
That was about six months ago and Mr. Johnson finally acknowledged that, "It was clear that withdrawing from our promotional model to a more everyday model has been harder than we anticipated."
You think? It wasnt just harder; it was expensive, coming with a price tag of a $552 million 4Q loss, which is a lot of money and pretty much a sign that your strategy isn't working. So what's a CEO with a chain in a death-spiral of same-store sales to do?
Back to Square One
We're glad you asked, because Mr. Johnson has an answer to that question: go back to the original sales strategy they scrapped last year, and restore sales on a weekly basis. But if you do that, how do you protect your already tiny fair-and-square margins, where you're losing money big-time?
Now you might think that was going to be a really difficult question to answer, but not so much, particularly for someone who came from a company where simplicity and elegance were the watchwords. It's been reported that Mr. Johnson's elegant plan is to raise jcp prices to their former, higher levels the ones before the fair-and-square pricing and then cut them. Simple, huh?
No, no, you read that right. They're going to raise the prices and then -- wait for it -- lower them, figuring that will give them the appearance of having provided consumers with a large discount at a sales event, so it will appear even more special and of greater value to customers. So, all in all, not so fair-and-square and really fake prices.
If you are as dumbfounded as we, join the club. In a century where consumers are more marketer than fool, speak to each other before they speak to the brand, and have access to more digital information each day, how does Mr. Johnson figure this strategy hoax is going to bamboozle consumers? We'd be fascinated to hear Mr. Johnsons answer to that.
In the meantime, for those of you interested, the phrase "fair and square" dates back to the 16th century. Fair was spelled "faire," and meant aboveboard, and square meant honest. So aboveboard and honest. But given the circumstances, with their new, more modern jcp logo, and more contemporary consumers, perhaps jcp should consider a more recent tagline. One from 1941: Never give a sucker an even break!
Robert Passikoff is President of Brand Keys, a research consultancy.
There's a wonderful Yiddish reflection -- "The difference between genius and stupidity is genius has its limits." That may explain the difference between ...
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By Robert Passikoff
Can Joe Fresh save J.C. Penney?
It's the struggling retailer's latest attempt to reinvent itself
Can a popular Canadian named Joe Fresh save a tired old American named J. C. Penney? We'll soon know. The troubled retail chain is opening Joe Fresh apparel shops inside 681 of its U.S. stores today, hoping to draw in new, younger customers to replace the ones it's driven away with its attempt to revamp itself.
"We want to become famous for irresistible style at incredible value every day," said Ron Johnson, Penney's embattled chief executive officer and former Apple retail wunderkind. "By introducing these exciting brands at truly affordable prices, we are making it easier for customers to look and live better every day."
Joe Fresh, as close as we can figure, is sort of the Gap of the North. It's billed as Canada's favorite apparel brand, claiming to offer "classic style with a twist."
Beginning today, Joe Fresh's spring collection of "modern basics for women" will be presented in 750- to 2,500-square-foot shops in nearly 700 jcp stores. All of the apparel and accessories will also be available on jcp.com for under $70, the retailer said.
"Building Joe Fresh shops inside jcp is a significant milestone because it makes us truly national, and now customers can buy Joe Fresh products online exclusively at jcp.com," said Joe Mimran, creative director of Joe Fresh. "The ability to broaden our reach reinforces the Joe Fresh brand promise, which is rooted in the belief that everyone deserves fresh style at fresh prices."
Having a bunch of "shops" inside the jcp stores is one of the key elements in Johnson's plan to reimagine the aging retail chain.
The hope, obviously, is that Joe Fresh will bring a fresh start to jcp. It certainly needs something. Even skeptics were shocked earlier this month when the company reported fourth quarter earnings that were a disaster even by recent J.C. Penney standards. The retailer reported a quarterly loss of $552 million, amounting to $2.51 a share.
Company revenue declined more than 28%. Same-store sales plunged 32%, worse than the previously worst 26.1% in the third quarter. Online sales dropped a stunning 34.4%.
Besides plummeting sales, jcp has been enmeshed in a bruising court battle with Macy's and Martha Stewart, the sort of dispute that winds up makes all parties look bad.
Will Joe Fresh be enough to turn things around? Maybe, but if it's not, the result could be a lot worse than another bad earnings report.
"If it doesn’t work, I think it’s going to get really ugly,” said one analyst quoted by Bloomberg Businessweek, echoing a sentiment that's become commonplace on Wall Street.
Consumers aren't wild about the changes either. Angela of Carolina Shores, N.C., said she went to the Penney's in Myrtle Beach a few days ago and found it even emptier than the last time she was there.
"I did see 1 or 2 people cutting through to get to the parking lot but not shopping. I did find a blouse [but] lo and behold, there were no cashiers," Angela said in a ConsumerAffairs review. "I then stopped an associate and asked 'Where do I pay for this?' She took out an iPhone and asked for my credit card.
"I stood there with my mouth open. I proceeded to say 'Are you kidding, what is this all about?' She told me it was a new process now at Penney's. ... By the way, I completed my shopping at Dillard's. They are more people friendly!"
Diane of Menomonee Falls, Wis., blames the company's directors.
"You allowed this one CEO high-tech idiot to destroy what took a century to build. I am (was) a loyal JC Penney customer. I am 54 and ex-New Yorker who spent zillion hours shopping in my life while always hunting for a good sale, a good sale, which is something you took away! Why did you allow this to happen? Why did you stop the fun sales?" Diane asked.
"You allowed this non-retail person to end fashionable and affordable lines for ladies (who are not 15 and a size 0). Those people don't shop in JC Penney's anyway. You lost the middle age shoppers like me. You never had many of the 20 something's; the 30's don't like what you did either. So who do you have shopping besides your employees? No one," she said. "Get rid of Mr. High Tech. Let him turn Best Buy around and hire a few of your 50-something female employees who know what we like before it's too late. I won't be back until he's gone!"
Like Diane, Charlotte of Kingsport, Tenn., is a longtime customer who has scratched Penney out of her playbook.
"I have tried to keep an open mind about the changes being made at JCP, but I have reached the point that I am completely unable to see any improvements that have been made. All of the changes seem to be detrimental," she said. I received a $10 coupon last week, so I thought I would give it one more try. I was shocked since my last visit in early January. The store was so empty it looked like it was going out of business. Many of the customer service centers (cash registers) had been closed. I didn't find anything that I wanted to buy even with $10 off. All of the brands that I loved are gone. Ordering on the website is a joke. It's hard to find anything in stock. If the coupon had been for $100, I still would not have been able to use it. I can't believe the damage that has been done to this company and cannot imagine how it will ever recover."
Many of the retailer's old customers say "I told you so"
It came as something of a shock this week when J.C. Penney reported fourth quarter earnings that were a disaster, even by recent J.C. Penney standards. The retailer reported a quarterly loss of $552 million, amounting to $2.51 a share.
Company revenue declined more than 28%. Same-store sales plunged 32%, worse than the previously worst 26.1% in the third quarter. Online sales dropped a stunning 34.4%.
If Wall Street was surprised, ConsumerAffairs readers were not. A year ago, when newly installed CEO Ron Johnson instituted radical changes in marketing and product line-ups, long-time Penneys customers turned to ConsumerAffairs to vent their anger.
Hate it, hate it, hate it
“I hate the new pricing that J.C. Penney recently implemented,” Jeannette wrote in a post at ConsumerAffairs a year ago. “All of my coworkers, family and friends feel the same way. I hope the CEO or whoever that made these changes will change things back to the way they were or at least improve the pricing! I predict that many stores especially in my small community area will be closing if something does not change. Listen to your customers!”
Johnson, who ran Apple's retail business, instituted the changes in February, doing away with sales and coupons and going to what he called a three-tiered pricing system. He also initiated a more youthful, off-beat marketing approach, apparently designed to attract younger, hipper shoppers. In so doing, Penneys has managed to alienate a large portion of its customer base while failing to snag the new customers it covets.
In a blunt article this week, the Wall Street Journal noted the retailer has lost $4.3 billion since Johnson has been at the helm. That article prompted Lisa, of Rochester, N.Y., to rush to the retailer's defense.
At least one happy shopper
“I've had a super easy time finally finding things I love at great prices at Jcp,” Lisa wrote in a ConsumerAffairs post this week. “I saw the Wall Street Journal's article today & wanted to put in a good word for a company that makes shopping fun again.”
But Lisa is definitely in the minority among posters at ConsumerAffairs. More typical over the last year is Diane, of Menomonee Falls , Wis., who this week dropped a big, “I told you so!”
“Attention big stockholders of JC Penney, if their are any left, HEAR US. You allowed this one CEO 'high tech' idiot to destroy what took a century to build. I am (was) a loyal JC Penney customer. I am 54, ex-New Yorker who spent a zillion hours shopping in my life while always hunting for a good sale. GOOD SALE! Which you took away! Why did you allow this to happen?? Why have did you stopped fun sales? You allowed this non-retail person to end fashionable, affordable lines for ladies who are not 15 and a size 0. Those people don't shop in JC Penneys anyway. You lost the middle age shoppers like me.”
If Penney's shareholders and retail gurus want to figure out where Penney's went wrong, they might do well to read through the ConsumerAffairs reviews over the last year. They will not only find angry longtime customers like Diane but customers who are really trying to give the new makeover a try but end up frustrated.
“I bought a complete Van Heusen suit, shirt, and shoes for my 10 years old son online at JCPenney.com,” writes Paul, of Freemont, Calif. The jacket to the suit was to be shipped about three weeks after ordering, due to backorder. The rest of the items were shipped within a week.
"After more than three weeks of waiting, I received a cancellation email from JC Penney informing me that the jacket is no longer available. A visit to a local JC Penney shows the same jacket/size is available on the rack for a full price instead of the sale price which was on sale when I placed my order. A call to JCP's customer service seemed like a run-around with no real solution to get it resolved. JCPenney just lost another loyal customer that had been shopping in their stores/on-line for years.”
Kathy, of Sheridan, Wyo., reports a similar experience. She reports ordering some blinds online and receiving a thank you email.
“After a week I went to check on the order but it said I had no order so I ordered the blinds again,” she writes. “My bank account showed a pending transaction for this order but eventually was not charged. I checked my order status and no orders where displayed. After a month I called JCP and they told me nothing was ever placed. I ordered my blinds somewhere else and received them within a week.”
Ironically, during this week's post-results conference call, Johnson raved about a new Oracle IT system that, presumably, should make sure Paul gets his suit and Kathy gets her blinds.
“The problem with JCPenney's IT strategy is that it needs the business to deliver results as well,” tech site ZDNet observed in its report on the conference call.
But if you ask a lot of our readers, J.C. Penney may be running out of time.
It came as something of a shock this week when J.C. Penney reported fourth quarter earnings that were a disaster, even by recent J.C. Penney standards. The...
Company continues to alienate old customers without drawing new ones
Since taking over as CEO at JC Penney, Ron Johnson has made it his stated goal to transform the stodgy retailer into the next big thing. The transformation began in January with edgy commercials and a new pricing structure that did away with sales and coupons.
So how's that working out?
It's fair to say it has yet to catch fire. JC Penney reported its third-quarter results today, showing a 26 percent decline in sales. Wall Street was prepared for a decline of 18 percent.
The company lost $123 million, or 56 cents a share in the July through September period. The loss was much bigger excluding one-time items. Revenue totaled $2.93 billion, but the Street was expecting $3.27 billion. If Wall Street was surprised by the showing, many long-time Penney's customers, and former customers who have railed against the changes these last 10 months, weren't.
"I have been buying jeans from JC Penney for as long as I can remember. I've been getting bombarded by emails for months now saying how great the new JC Penney is. My daughter and I went to get some jeans last night and were shocked at an empty-looking store," Christopher, of Hernado, Miss., wrote in a ConsumerAffairs post. "I was even more shocked about the tiny selection of clothes there was to purchase. The jean selection was the worst. JC Penney has lost a customer for good. Whoever decided to do the revamp should be fired."
Barbara, of Mechanicsville, Md., who also describes herself as a long-time Penney's customer, was turned off by the changes in her local store.
"I received an email from the new CEO about all the good things that were coming," she wrote to ConsumerAffairs. "This week, I went back to the store in California, Md., to again look for clothes for my husband. There was even less than a few months ago. When I looked for underwear for him, I found that same package of boxer shorts and no more new ones. I talked to a sales person and was told that she thought the company was targeting a younger customer base. Well, JC Penney, you should be a company for all ages. I will not come again to shop."
Johnson makes no secret that Penney's is looking for new customers who are attracted to his concept of transforming Penney's stores into a collection of small boutiques under one roof. In a statement, he says Penney's is "a tale of two companies."
"By far the largest part of our store is the old jcp, which continues to struggle and experience significant challenges as evidenced by our third quarter results," Johnson said. "However, the new jcp, centered around the shop concept, is gaining traction with customers every day and is surpassing our own expectations in terms of sales productivity which continues to give us confidence in our long-term business model."
During the quarter, Penney's opened shops under the Levi's , Izod, Liz Claiborne, The Original Arizona Jean Co., and jcp brands. The company also opened 38 Sephora inside jcpenney stores, bringing the total to 386. Yet the shops remain a small part of overall sales.
Johnson said he's confident that, given enough time, the shops concept will catch on and Penney's will attract a new set of customers who will return the company to profitability.
Since taking over as CEO at JC Penney, Ron Johnson has made it his stated goal to transform the stodgy retailer into the next big thing. The transformation...
At the beginning of 2012 retailer J.C. Penney, under the new leadership of CEO Ron Johnson, embarked on a number of bold, dramatic changes. The reaction from many long-time Penney's customers was not overly positive.
Since then the company has struggled and now reports it lost $81 million, or 37 cents a share, in the second quarter of the year. That's on top of the $163 million the department store chain lost in the first quarter. The second quarter loss would have been even steeper if not for the sale of some company assets during the period.
"We have now completed the first six months of our transformation and while business continues to be softer than anticipated, we are confident the transformation of J.C. Penney is on track," Johnson said. "The transition from a highly promotional business model to one based on everyday value will take time and we will stay the course."
From the start, many existing Penney's customers objected to the changes initiated under Johnson's new regime. In particular customers questioned why Penney's would do away with its sales and coupon promotions. The "fair and square" pricing system seemed to confuse some. Others objected to the company's television advertising.
Complaints to ConsumerAffairs, however, have tapered off in recent months, suggesting that angry consumers who vowed to stop shopping at Penney's have been true to their word. And the falling sales suggest that could be the case.
Perhaps more significant than the quarterly loss, J.C. Penney withdrew its guidance -- its expectations for the rest of the year to guide Wall Street investors. But rather than revising the guidance, as is common on Wall Street, it did not offer a new number. Back in May the company said it expected to earn $2.16 a share for the year.
In June, amid falling sales, Johnson backtracked a bit, reinstating periodic sales at Penney's stores. Despite that concession, the company appears to be doubling-down on its transformational course.
"We continue to learn and adjust, and fully expect that our unique, specialty department store experience will drive J.C. Penney's long-term success," he said. "Our rock solid balance sheet will support the execution of our transformation and position us for growth beginning in 2013."
Perhaps, but there are plenty of doubters on Wall Street. Goldman Sachs analyst Adrianne Shapira told Forbes the company lacks "meaningful traffic drivers" without coupons and she was not surprised Penney's was forced to "retract what proved to be overly optimistic initial guidance.”
At the beginning of 2012 retailer J.C. Penney, under the new leadership of CEO Ron Johnson, embarked on a number of bold, dramatic changes. The reaction fr...