Ron Johnson, CEO of JCPenney now candidly admits that the new pricing strategy of the company has been a failure, where the company missed sales projections by 15%. Under Johnson’s leadership, the company eliminated sales in favor of low everyday prices, however that backfired by not giving potential customers much incentive to shop at JCPenney stores, and instead chose to shop elsewhere for advertised specials.
Johnson prefers to blame the customers, claiming that they “don’t get” the new company pricing strategy. But, it actually appears to be Johnson who just doesn’t get many things about business for own his part. For one thing, most stores advertise and run specials precisely because it does bring in customers. Further, Penney’s has now lost that incentive edge against other competitors with Johnson’s pricing plan. Further, customers are smart enough to see that overall they’re likely paying more than they used to because of less sales and attempts to end coupon use at the stores. Customers actually see through the new JCPENNEY pricing strategy and don’t really like it, and sales are missing projections as a natural result.
Johnson even offered up the convoluted reasoning that “Coupons were a drug, they really drove traffic” to justify his screwy plan to ween customers away from coupons. If Johnson knew that most successful business retailers for similar goods as what sells use coupons to drive traffic, then why walk away from this proven formula?
Under Johnson’s leadership, JCPenney common stock is down about 20% in value today in the worst price plunge for that stock , and quarterly sales projections are off course as well. But, Johnson has his fans such as a former Kraft executive who has raised Johnson as a “Rocket man”, claiming that he is just what JCPenney needs at the helm. However, there has to be more than a JCPenney stock shareholders who might just beg to disagree with Johnson’s leadership at this time. When some new CEO brings both sales and the price of stocks down with unproven sales methods, wise investors will look to jump ship from a stock like this.
It was announced today that JCPenney posted a $163 million quarterly loss, and was canceling dividends to shareholders. Wisely, I sold my own shares last week during day trading on a hunch that things weren’t well at JCPenney. Their advertising campaign looked like a real dud to me. Hunches in business are all important. At some point JCPenney should be a strong company again, and their stock will look like a bargain at today’s bargain basement prices. But, for today it sure seems like smart money to stay away from this stock until the company institutes some more normal pricing policies in their stores.