J.C. Penney News

JCPenney, one of the U.S. retailers thrown into bankruptcy by the coronavirus (COVID-19), will reportedly merge with Belks, a retailer with 300 stores, mostly in southern states.

The New York Post quotes sources close to the deal as saying that Sycamore Partners, a private equity firm, has submitted the highest bid for JCPenney in a bankruptcy auction. The firm, which owns Belks, also owns retailers Talbots, Staples, and The Limited.

Like JCPenney, Belks has also been struggling amid declining sales during the pandemic. Both were facing difficulty even before the virus struck, as consumer preferences changed and more shopping moved to online channels.

“JCP is the lifeboat for Belks, which wants to compete with Macy’s nationally,” the source told the Post.

All three bids are close

According to the newspaper, Sycamore Partners will likely land the 118-year-old retailer with a bid of $1.75 billion. The Post’s sources said Saks Fifth Avenue owner Hudson’s Bay Company is also still in the running with a $1.7 billion bid along with a pair of mall operators that offered $1.65 billion. 

“The three bids are being analyzed and because there’s not a big difference between them, it means that all three are seeing a similar valuation,” a source told the Post. It will be up to the bankruptcy court to decide which firm acquires the retailer.

At last report, JCPenney operated 850 stores in 49 states and Puerto Rico. It filed for bankruptcy in May after temporarily closing most of its stores. Its stores serve as anchors at many malls across the U.S., and the department store’s fate was seen as critical to the future of many malls.

A combination with Belks could give the combined enterprise a much larger footprint. Due to the challenges facing retail, the sources told the Post that Sycamore Partners planned to rebrand 250 JCPenney stores as Belks and liquidate the rest.

Sycamore Partners offered $1 billion for a major stake in Victoria’s Secret before the pandemic struck but backed away from the deal as the U.S. economy shut down, accusing the firm’s owner of violating the terms of the agreement.

The pandemic has resulted in a wave of bankruptcies in the retail industry. Besides JCPenney,  J. Crew, Neiman Marcus, Brooks Brothers, and New York & Company have filed for Chapter 11 protection in the last four months.

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 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.

Back in 2017, J.C. Penney said it would be continuing to build its online presence while retaining its physical locations.

“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 in a blog post on Wednesday that it will stop selling major appliances in its stores starting February 28.

The retailer said that removing appliances would help it "better meet customer expectations, improve financial performance and drive profitable growth."

In addition to shuttering its home appliances showrooms, the chain is also changing its plan for selling furniture. Going forward, furniture will only be available on jcp.com and in some stores in Puerto Rico.

Using extra space to focus on ‘legacy’ categories

The revised game plan regarding home furnishings will reduce inventory, giving stores additional space to "create an enhanced shopping experience that inspires repeat shopping trips,” J.C. Penney said in a statement.

"Optimizing the allocation of store space will enable us to prioritize and focus on the company's legacy strengths in apparel and soft home furnishings, which represent higher margin opportunity," the retailer said.

The company said it will provide more details about its decision to bow out of the home appliance business when it reports its fourth-quarter earnings on February 28. At that time, the retailer is also expected to offer details on additional store closures. Two years ago, the chain confirmed that it would close 140 stores amid declining sales.

Consumers who purchase an appliance from J.C. Penney before February 28 will get free basic delivery and installation on new model purchases over $299.

You could think of modern retailing as a lifeboat that is taking on water. Every now and then, one passenger jumps (or is pushed) overboard and the boat rides a little higher in the water. For a little while. 

hhgregg is the latest to take the plunge, joining Radio Shack and countless others in the murky depths. Best Buy, J.C. Penney, and others may be feeling a little more buoyant today, but it's not likely to be very long before that terrible sinking feeling returns.

J.C. Penney recently started selling appliances, so it may see some benefit from hhgregg's demise. And with hhgregg overboard, Best Buy solidifies its position as the last-standing big electronics retailer, at least for now.

hhgregg filed for bankruptcy last month while it tried to find a buyer, but after meeting with more than 50 private equity firms and other potential saviors, it was obvious that there would be no lifeline, so the electronics and appliance retailer began jettisoning its inventory over the weekend. 

It expects to close all 220 stores by the end of May, displacing about 5,000 employees.

The bubble burst

You can blame all of this on Amazon and other online retailers, but analysts say there's another factor at play as well -- a retail bubble. America is simply "over-stored," as one observer put it recently.

Urban Outfitters CEO Richard Hayne said much the same in a recent Indianapolis Business Journal report, saying big malls added way too many stores in recent years -- many of them selling the same things.

“This created a bubble, and like housing, that bubble has now burst,” he said. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate."

Shopping malls already have hundreds of slots to fill, and the situation is likely to get worse, especially as "anchor" retailers like Sears and Macy's continue to close stores, or even sink from sight.

It's not doing much for job growth either. The Labor Depmartment reported Friday that retailers cut around 30,000 positions in March, the worst two-month showing since 2009.

J.C. Penney said last month that it would close about 130 stores as it tries to contend with falling traffic, and today it released a list of 138 stores that will be closing. 

The company said the stores on the chopping block generate less than 5% of sales revenue. With the closings, the company will have about 970 stores remaining. 

The stores slated for closing are:

Auburn Mall, Auburn, AL
Tannehill Promenade, Bessemer, AL
Gadsden Mall, Gadsden, AL
Jasper Mall, Jasper, AL
Military Plaza, Benton, AR
Chickasaw Plaza, Blytheville, AR
Riverview Mall, Bullhead City, AZ
Downtown Bishop, Bishop, CA
Sunwest Plaza, Lodi, CA
The Village at Orange, Orange, CA
Hilltop Mall, Richmond, CA
Fort Morgan Main St., Fort Morgan, CO
Glenwood Springs Mall, Glenwood Springs, CO
St. Vrain Centre, Longmont, CO
Broadway Plaza, Sterling, CO
Connecticut Post Mall, Milford, CT
Jacksonville Regional Shopping Center, Jacksonville, FL
Palatka Mall, Palatka, FL
Dublin Mall, Dublin, GA
Macon Mall, Macon, GA
Milledgeville Mall, Milledgeville, GA
Gateway Plaza, Thomasville, GA
Tifton Mall, Tifton, GA
Downtown Decorah, Decorah, IA
Crossroads Mall, Fort Dodge, IA
Penn Central Mall, Oskaloosa, IA
Quincy Place, Ottumwa, IA
Snake River Plaza, Burley ID
Eastland Mall, Bloomington, IL
Fulton Square, Canton, IL
Village Square Mall, Effingham, IL
Macomb, IL
Peru Mall, Peru, IL
Northland Mall, Sterling, IL
Centerpointe of Woodridge, Woodridge, IL
FairOaks Mall, Columbus, IN
Connersville Plaza, Connersville, IN
Huntington Plaza, Huntington, IN
Jasper Manor Center, Jasper, IN
Logansport Mall, Logansport, IN
Chanute Square, Chanute, KS
Downtown Great Bend, Great Bend, KS
Hutchinson Mall, Hutchinson, KS
Lawrence KS
Winfield Plaza, Winfield, KS
Cortana Mall, Baton Rouge, LA
Park Terrace, DeRidder, LA
North Shore Square, Slidell, LA
Berkshire Mall, Lanesborough, MA
Easton Marketplace, Easton, MD
Rockland Plaza, Rockland, ME
Lakeview Square Mall, Battle Creek, MI
Delta Plaza, Escanaba, MI,
Westshore Mall, Holland, MI
Copper Country Mall, Houghton, MI
Birchwood Mall, Kingsford, MI
Midland Mall, Midland, MI
Cascade Crossings, Sault Ste. Marie, MI
Central Lakes Crossing, Baxter, MN
Five Lakes Centre, Fairmont, MN
Faribo West Mall, Faribault, MN
Irongate Plaza. Hibbing, MN
Hutchinson Mall, Hutchinson, MN
Red Wing Mall, Red Wing, MN
Downtown Thief River Falls, Thief River Falls, MN
Winona MN
Maryville Center, Maryville, MO
Leigh Mall, Columbus, MS
Southgate Plaza, Corinth, MS
Greenville Mall, Greenville, MS
Bonita Lakes Mall, Meridian, MS
Oxford Mall, Oxford, MS
Capital Hill Mall, Helena, MT
Sidney Main Street, Sidney, MT
Albemarle Crossing, Albemarle, NC
Boone Mall, Boone, NC
Eastridge Mall, Gastonia, NC
Blue Ridge Mall, Hendersonville, NC
Monroe Crossing, Monroe, NC
Becker Village Mall, Roanoke Rapids, NC
Prairie Hills Mall, Dickinson, ND
Buffalo Mall, Jamestown, ND
Downtown Wahpeton, Wahpeton, ND
Fremont Mall, Fremont, NE
Downtown McCook, McCook, NE
Platte River Mall, North Platte, NE
Rio Grande Plaza, Rio Grande, NJ
The Boulevard, Las Vegas, NV
Dunkirk-Fredonia Plaza, Dunkirk, NY
Westfield Sunrise, Massapequa, NY
Palisades Center, West Nyack, NY
Findlay Village Mall, Findlay, OH
New Towne Mall, New Philadelphia, OH
Richmond Town Square, Richmond Heights, OH
St. Mary's Square, St. Marys, OH
Altus Plaza, Altus, OK
Ne-Mar Shopping Center, Claremore, OK
Ponca Plaza, Ponca City OK
Pioneer Square Shopping Center, Stillwater, OK
Astoria Downtown, Astoria, OR
Grants Pass Shopping Center, Grants Pass, OR
La Grande Downtown, La Grande, OR
Downtown Pendleton, Pendleton, OR
The Dalles Main Street, The Dalles, OR
Columbia Mall, Bloomsburg, PA
Clearfield Mall, Clearfield, PA
King of Prussia Mall, King of Prussia, PA
Philadelphia Mills, Philadelphia, PA
Bradford Towne Centre, Towanda, PA
Lycoming Mall, Pennsdale, PA
Willow Grove Park, Willow Grove, PA
Citadel Mall, Charleston, SC
Town 'N Country, Easley, SC
Palace Mall, Mitchell, SD
Northridge Plaza, Pierre, SD
Watertown Mall, Watertown, SD
Yankton Mall, Yankton, SD
Greeneville Commons, Greeneville, TN
Knoxville Center, Knoxville, TN
County Market Place, Union City, TN
Athens Village Shopping Center, Athens, TX
Borger Shopping Plaza, Borger, TX
Heartland Mall, Early, TX
El Paso Downtown, El Paso, TX
Marshall Mall, Marshall TX
McAllen, TX
University Mall, Nacogdoches, TX
King Plaza Shopping Center, Seguin TX
Bosque River Center, Stephenville TX
New River Valley Mall, Christiansburg, VA
Tanglewood Mall Roanoke, VA
Pilchuck Landing, Snohomish, WA
Pine Tree Mall, Marinette, WI
Marshfield Mall, Marshfield, WI
Richland Square Shopping Center, Richland Center WI
Rapids Mall, Wisconsin Rapids, WI
Foxcroft Towne Center, Martinsburg, WV
Downtown Sheridan, Sheridan WY

J.C. Penney reported its first annual profit since 2010 today but in the next breath announced that it will close about 130 stores and two distribution centers as it tries to contend with falling store traffic.

Like other shrinking retailers, including Macy's and Sears, J.C. Penney said it will continue to build its online presence as strolling shoppers become an endangered species. In a press release, the company referred to the closings as "optimizing" its retail operations.

"We believe the relevance of our brick and mortar portfolio will be driven by the implementation of these initiatives consistently to a larger percent of our stores. Therefore, our decision to close stores will allow us to raise the overall brand standard of the Company and allocate capital more efficiently," said Marvin R. Ellison, chairman and CEO, in a news release.

It's not just Amazon and other online merchants who are strangling traditional department stores; it's also off-price retailers like TJ Maxx and Marshall's, both owned by TJX Cos., which this week said it would be opening about 1,800 stores.

Will remain competitive

Ellison said that even after the closings, J.C. Penney would remain competitive in the brick-and-mortar field. 

"Maintaining a large store base gives us a competitive advantage in the evolving retail landscape since our physical stores are a destination for personalized beauty offerings, a broad array of special sizes, affordable private brands and quality home goods and services. 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," Ellison said.

Could be, but not all shoppers find the experience quite so seamless.

"Amazon is killing these stores online and these idiots have no clue why?" said Adrian of Chicago, in a recent ConsumerAffairs review. "You don't have speed delivery, you don't even email a tracking number to your customers, and you don't even have ALL YOUR PRODUCTS ONLINE."

Nor does the in-store experience always win kudos from shoppers.

"I took my children shopping on Jan. 2nd at the Parks Mall in Arlington, TX as they had Christmas money they wanted to spend," said Kaylene of Ovilla, Texas. "My teenage son chose a Nike jacket he wanted and proceeded to go stand in the line which only had one cashier working. After waiting on him for at least 20 minutes or more and there were still 5-6 people in front of him, I told him just to put it back, we didn't have that kind of time."

Ellison, however, sees a bright spot, insisting that he has found the answer to high delivery costs.

“While many pure-play e-commerce companies are experiencing dramatically increasing fulfillment costs, we are pleased with the double-digit growth of jcpenney.com and how leveraging our brick and mortar locations is enabling us to offset the last-mile delivery cost,’ he said. “We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimize the growing operational costs of delivery.”

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.

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

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.

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.

Misrepresentation?

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.

Glowing review

“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.

Radical changes

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.

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. 

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. Johnson’s 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 won’t 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!

Customer engagement

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:

Kohl’s: 84%
Macy’s: 82%
Marshall’s: 81%
T.J. Maxx: 80%
Dillard’s/Sears: 79%

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.

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.

Partly successful

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."