Former JC Penney CEO Allen Questrom has been one of Ron Johnson's most outspoken critics, saying his discounting strategy clearly failed back in August. More recently, after the company's disastrous fourth quarter, he said the company " can't continue with the same leadership" if it wants to recover.
He's worth listening to. Questrom's a legend for turning around JC Penney from 2000 to 2004 when it seemed headed for bankruptcy, and has also led Neiman Marcus and Federated Department Stores (now Macy's).
Women's Wear Daily broke the news Saturday that Johnson attempted to mend fences with Questrom and convince him Johnson's strategy was best by giving him a personal tour of the company's prototype store in Dallas.
Questrom came away impressed with Johnson, telling the Dallas Morning News "h e’s a very nice man, bright, a good communicator and a good salesman," and that " I would like nothing more than for him to be successful ."
However, none of that changed his mind about the company's mistake. Questrom still feels that Johnson made a huge strategic gamble without testing it. And now it's paying the price, he told Maria Halkias:
“Penney had an existing base of people who decided to shop there. Those customers chose to come to you because of what you are. You can’t decide to change that without testing it first. I can’t imagine that this was done with the idea that sales would decline 25 percent.”
Essentially, it tried to do too much too soon. "I remember when Bloomingdale’s decided to go upscale," Questrom said. "It took 20 years.”
He personally likes the shops, calling them creative and well done, but he's not the one that Johnson has to impress; he's not a customer.
Hedge fund manager Bill Ackman, whose Pershing Square Capital Management owns 17.79 percent of the company's outstanding shares, was highly critical of the company's direction today, saying its execution "has been something very close to a disaster."
Even if the shops are a brilliant new direction for retail that will attract a whole new customer base, it's hard to argue that the rollout was done as well as it could have been.
Ackman's been nothing but supportive in the past, and recruited Johnson away from his previous job as head of retail at Apple. His waning confidence indicates Johnson's store of goodwill and time may be running out.
A 97 percent pay cut from his board isn't exactly a vote of confidence.
Johnson may still pull it off, but it doesn't seem likely. " If it works he’ll go down in history as a miracle man," Questrom said.
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