JCPenney's Last, Best Hope Is Launching Today
JCPenney is on the brink, and now, all eyes are on the struggling retailer's gigantic launch of a new shop.
Canadian fashion brand Joe Fresh will be entering a whopping 681 JCPenney stores simultaneously Friday morning.
When the deal was announced last July, it was just one of many moves CEO Ron Johnson was making to make his "shops" concept a reality. Joe Fresh would be coming in as part of a total overhaul of the brands JCPenney carried.
Months later, Joe Fresh has taken on a much greater significance.
“We are one of many new concepts being brought to JCPenney," Joe Mimran, the founder of Joe Fresh, told Women's Wear Daily . " But there is no question about it: There seems to be a bit more focus on our brand working.”
The retailer that has been on a terrible run. The last few weeks have been disastrous: it reported horrific Q4 earnings, went to court to fight Macy's over Martha Stewart, and had a board member dump a chunk of his stake.
Joe Fresh will be an indicator for the effectiveness of Johnson's overall turnaround plan, which is to transform the in-store shopping experience into his "shops" concept, and attract new customers to the store with his new assortment of brands. Johnson said that 61 percent of Joe Fresh buyers are first-timers at jcp.com.
But if it fails, it could all be over.
It would mean that Johnson's entire concept has no future.
“If Joe Fresh doesn’t work, this could be the worst ides of March since Brutus greeted Caesar on the floor of the Senate,” Rick Snyder, an analyst at Maxim, told Bloomberg Businessweek. "[Joe Fresh] is kind of a microcosm of what they’re trying to do, and if it doesn’t work, I think it’s going to get really ugly.”
Johnson is on a mission to get younger customers into his stores and Joe Fresh is at the center of that strategy. Not only could the brand grab those new customers, but perhaps convert some of the old JCPenney shoppers to newer styles.
Joe Fresh is a lifestyle brand and its line at JCPenney will feature everything from a $4 pair of flip flops to $39 silk tops. Nothing from Joe Fresh's JCPenney shop will cost more than $69, according to Racked.
"The products will be the first true lifestyle offerings under JC Penney’s new pricing scheme," Brian Sozzi, chief equities analyst at NBG Productions, told us. "Not only won't pricing be an issue with Joe Fresh, but from what I can tell the company is putting its marketing dollars behind the brand quite strongly."
It has been a long time coming. Johnson reached out to Mimran in early 2012 as JCPenney began its transformation.
“He shared with me his vision and the repositioning and transformation," Mimran told Women's Wear Daily last July. "For us, it looked like a great opportunity to get a very large footprint in the U.S. very quickly and to do it with someone who is visionary.”
Lately, JCPenney executives have been keen on mentioning Joe Fresh — over and over again.
JCPenney CFO Ken Hannah spoke at Bank of America's 2013 Consumer & Retail Conference on Wednesday and mentioned Joe Fresh repeatedly. Johnson also devoted a chunk of time to Joe Fresh on his Q4 earnings call.
Now, Joe Fresh's JCPenney launch has a ton of outside factors on its side. It's set up to succeed in the short-term, so if it doesn't, it will send a glaring signal that something is fundamentally wrong.
It's Spring. Tax refunds will be taken to malls. JCPenney is advertising heavily. The brand is only launching in JCPenney's bigger, better, more trafficked stores.
"This is a great moment to get the disenchanted JCPenney consumer re-engaged with the new JCPenney," said Sozzi. " The stock market will view it as a complete failure of Ron Johnson to truly understand what the consumer wants."
There's also the matter of Johnson himself. Will he be able to survive one more crisis?
"Should the shops succeed, the turnaround story could still have legs," Snyder wrote in a note.
"Should Joe Fresh launch with a thud ... [Johnson] could be forced out prior to back to school," Sozzi told us. "He will have wasted tons of capital on initiatives the consumer market wasn’t ready for yet and in the process, basically drove a 110 year old department store into a liquidity crisis."
It's enough of your challenge to get an existing customer to buy your products, but JCPenney has shed mass amounts of its core customer base. It has to bring back its old customers and find brand new ones.
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