One Year Into the Job, JCPenney CEO Struggling to Spark a Sales Turnaround

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Many politicians, actors and sports stars have experienced an annus horribilis. But when it comes to corporate CEOs, few have ever had as bad a year as Ron Johnson of JCPenney.

It’s been about a year since the former Apple retailing executive blew into Penney’s headquarters in Dallas believing that he had a secret formula that would do even more than rescue the company from its threatened place in the nation’s retailing industry. Eager to start a “retail revolution,” Johnson sought to simplify the company’s structure and re-program the American consumer’s attitude toward store pricing, discounting and promotional tactics.

A year ago today, at a splashy two-day press event in New York, Johnson outlined his vision for transforming the 110-year-old department-store chain over four years through “Fair and Square” pricing as part of a rebranding and repositioning for the company. But it’s not working.[more]

“Stores and merchandise look great,” noted the retailing writer for the Dallas Morning News. “But sales have collapsed, and 2012 ended up being a year of one step forward, two steps back” for Johnson. Or maybe one step forward, eight or ten back.

Johnson believed that shoppers would learn to appreciate Penney’s sudden cutoff of coupons and percentage discounts, which began last winter. They would learn to love the lack of gimmicks and embrace Penney’s new strategy to sell everything for “everyday low prices” and not try to yo-yo shoppers into the stores just to take advantage of pricing specials.

The brand even enlisted daytime TV star and comedian Ellen DeGeneres as its brand ambassador for a red carpet season campaign, and unveiled a patriotic new, red, white and blue logo — its third in as many years — while trying to get customers to start calling it “JCP,” albeit to no avail.

But despite his accomplishments in helping Apple set a new standard in retailing excellence, Johnson failed to get traction with his new philosophy right out of the gate at Penney. “He didn’t help [the shopper] come along,” said Wendy Liebmann, CEO of WSL Strategic Retail, in an interview with the Morning News.

It “has been a bigger challenge than I anticipated,” Johnson admitted recently after being forced to backpedal on his revamped sales strategy. He acknowledged, for instance, that Penney shoppers like sales — and the brand’s president took the fall for the misstep.

Penney was forced to begrudge some traditional-type promotions for last fall’s holiday season, though Johnson refused to call them “sales.” But it was too late: Penney is estimated to have lost $4 billion in revenues during its first year of everyday low prices. 

Meanwhile, a pinched Penney now is attempting to push some manufactsurers to concoct phony suggested retail markups for their clothing, a story in the New York Post alleged today. The plan, the Post said, “includes erecting signs and fixtures that will display the sometimes-made-up retail prices, while tagging the clothes and accessories themselves with Penney’s own lower prices.” Penney executives did not respond to the Post’s requests for comment.

Johnson has stuck with his plan — and the Penney board has stuck with him. In addition to a new brand image, and upgrading stores, he has rolled out more branded in-store boutiques from the likes of Sephora, Liz Claiborne and Izod, as well as a Levi’s “Denim Bar.” A Target-like limited-edition holiday collection with another round of designers — Viivienne Tam, Jenny Packer and Lulu Guinness —  seem to be producing encouraging results as a mainstay of Johnson’s strategy for turning Penney’s sales drought around in the next few years. New brands to Penney, including Martha Stewart and Michael Graves, should help the cause, he has said.

As recently as early January, Johnson insisted at an investor conference that Penney’s “marketing is really starting to connect” with customers. And he predicted that, in 2013, Penney will become “a happening place.”

“We know what we want to build,” he said at the Women’s Wear Daily conference. “The only question now is how long it’s going to take.”

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