J.C. Penney's stock price has tumbled roughly 50 percent over the past five years and the brand has lost some of its allure of chic yet affordable goods to competitors like Target.
The staid retailer is undergoing a transformation.
Retail veteran Ron Johnson, who took the reins as CEO last November, has shook up the 110-year-old company in every aspect: pricing, store layout, product selection. Johnson, best known for designing Apple's retail stores, says he believes the company can have the same success as his former employer but acknowledges it "won't happen overnight." It might take months or weeks to become America's sweetheart again.
"We are rethinking everything we do," Johnson tells The Daily Ticker's Aaron Task in the above clip. "We're treating our company as an $18 billion start-up."
In just three months as CEO, Johnson threw out the company's pricing strategy and replaced it with a three-tier system that went into effect this month. The company jettisoned its nonstop promotions and instead offers three pricing deals: everyday, monthly specials and clearance. Johnson says the retailer ran 590 unique promotions last year - a number he implied that was too high and which backfired for the company.
"The customer got fed up trying to decide when was the right time to buy," he says. "We think we can become America's favorite store but it's going to take us rethinking everything we do."
Drawing customers to J.C. Penney stores entails more than just price adjustments. Johnson hired comedian and daytime TV star Ellen DeGeneres as spokesperson [See: J.C. Penney CEO on Ellen DeGeneres Boycott Threats: "America Believes in Ellen"], updated its logo, introduced a flashy marketing campaign and hired designer Nanette Lepore in a new partnership. Last December the company announced it would open Martha Stewart mini-shops inside the majority of its locations starting in 2013.
There are more than 1,100 J.C. Penney stores in the U.S. and Johnson has said previously he has no plans to close any of them. Johnson told Aaron in the interview that the company was profitable last year, but the company's December same-store sales rose just 0.3 percent, well below industry averages, and the company had to cut its holiday sales forecast. J.C. Penney has suspended reporting same-store sales as it revamps its pricing structure, according to Johnson.
As the company overhauls its image and attempts to rebuild its relationship with consumers, the company also has to contend with a weak economy and a consumer that's still struggling years after the financial crisis. Many retailers have reported weaker than expected sales over the past few months and the government reported Tuesday that retail sales in January increased 0.4 percent, after being flat in December, but missed economists' forecasts.
After working more than a decade at Apple as its senior vice president of retail operations, where he headed up Apple's Genius Bar and One-on-One Training, it will be hard for Johnson not to compare J.C. Penney's progress with the electronic retail juggernaut. Johnson instinctively brings up Apple even as he discusses his vision for J.C. Penney. Johnson says both companies had a market share of three percent when he joined them and goes as far as saying that J.C. Penney resembles a stronger company today than when Apple first opened its stores to the public.
"It's going to take time and we have a lot of work to do but I really like the direction we're headed and it feels just like Apple when we opened that first store back in 2001," he said.
- Ron Johnson