Boston, MA 10/22/2013 (wallstreetpr) – J C Penney Company Inc (NYSE:JCP) appears to be deep trouble. The low-cost department store was hit by several wrong decisions taken by ex-CEO Ron Johnson. Ron wanted to take the retailer up-market, and increase margins. The retailing industry is facing increased competition, changing demographics as well as changing customer expectations. Ron felt that he had the pulse of the customers. He closed down popular schemes like coupon sales and also removed many house brands from the shelves. He also opened boutique stores within stores. The result was disastrous. Same-stores sales dropped, revenues were affected and profits tumbled.
The company realized its mistake and replaced the CEO. The new CEO was quick in reversing many decisions. He has been closing several boutiques, has restarted coupon and discount sales and reintroduced several house brands. The turnaround strategy appears to be working, and there is a slight improvement in same-stores sales. Same-store sales figures are an important indicator for a retailer as they show how loyal their customer base is. Mike Ullman is using his earlier experience in JCP to lead the way in restructuring the company again. Though, it has ended its partnership with Martha Stewart to avoid court ruling on dispute with Macys, it was one of the steps envisaged by Mike.
JC Penney is on a turnaround strategy aimed at luring its customer base back. The company is tinkering with merchandising mix and inventory levels. This may attract some of the customers back to the fold. The issue of changing customer expectations still remains. Perhaps Ron was right in trying to change the consumer preference of JC Penney from a traditional retailer to a more up-market boutique retailer. After all, retailers like JC Penney suffer from the competition from on-line retailers who can offer a better value proposition than such brick and wall retailers. They also manage to score over costs as inventory and supply chain costs can be controlled drastically.
Investors appear to be confused about the state of affairs in the company. There is a lot of negative sentiment about the company in the market. The shares are trading near the 52 week low of $6.27; they closed at $6.42, a drop of 8.29% over the previous close.
