JCPenney ousts CEO: Is it too late for the company?
It’s been a rocky year for JCPenney, and that’s putting it kindly: Shares and profits are plunging, jobs have been shed by the thousands, and a series of managerial missteps have left the century-old department store chain with a confused brand identity and without its established customer base, meanwhile having failed to attract a new one.
Barring a major turnaround, many are wondering: Is the end looming for one of the country’s biggest, oldest department stores? Furthermore, do JCPenney’s troubles bode poorly for mid-range box stores in general as they struggle to keep up with Internet merchants and discount stores?
Penney’s has been the subject of many grim financial headlines of late: Most recently, the company announced Monday evening the ousting of beleaguered CEO Ron Johnson. His replacement? The man he replaced: The company is rehiring Myron Ullman, who held the CEO job from 2004 to 2011.
Investors were not pleased. The Plano, Texas-based company's stock slid 12 percent Tuesday on the news of Mr. Ullman’s rehiring, after going up 11 percent after Mr. Johnson’s exit.
Such has been the story for JCPenney in recent months, particularly with Johnson at the helm. He was brought in only 17 months ago, after successful stints as an executive at Target and Apple. “There were lofty expectations for the man who made Apple's stores cool places to shop, and before that, pioneered Target's successful ‘cheap chic’ strategy,” the Associated Press reported.
In early 2012, Johnson unveiled an unconventional pricing strategy that eliminated sales and discounts, promising consistently lower prices instead. But the approach confused customers, and they left in droves.
“As he tried to move Penney to an everyday low price approach, Johnson was quickly confronted with the reality of how Penney's longtime customers shop: They love a deal and need a price comparison on a tag to understand they are getting one,” Reuters reported late last month “Without it, they'll go elsewhere. And they did.”
The company laid off 13 percent of its workforce in April 2012, and its shares lost over half their value during Johnson’s tenure. Sales dropped 25 percent last year.
Ullman is seen by many as a stop-gap, not a long-term solution. Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisers, told the Associated Press that he expects Ullman to serve as an interim CEO until the Penney’s board finds another executive, who will potentially take the company private.
Meanwhile, the company is also suffering something of an identity crisis in the wake of Johnson’s departure. Charged with freshening up the store’s image, he brought in designer brands like Betsey Johnson, and Martha Stewart. Last year, Johnson introduced a new store layout built around a “store-in-store” concept, where different sections of the floor are devoted to specific designers. Best Buy, Target, and Macy’s have experimented with similar layouts as well, with varying degrees of success.
That seemed to work, in a sense: the “boutique” parts of remodeled stores have been outselling the rest of the stores by about 20 percent, according to Time. But some worry it could have disastrous effects in another way: "This rapid and dramatic change at JCPenney totally baffled JCPenney’s loyal customers," Forbes reported in late March. “[Johnson] was trying to take JCPenney upscale while their shoppers wanted a respectable but low-price alternative that offered some terrific deals each and every week.”
Only about half of JCPenney''s stores were remodeled. Now that Johnson is out, his original vision for the JCPenney rebrand are unlikely to come to fruition; time will tell if another executive can come in and right the ship, luring in new customers while keeping the old ones happy.
Editor's note: An earlier version of this article stated that Mr. Johnson brought the Sephora brand to JCPenney stores. Sephora was brought in in 2006, under Mr. Ullman.
