Former Apple retail chief under fire as JC Penney stock plummets
With a little over six months on the job as JC Penney's chief executive, former Apple senior vice president of retail Ron Johnson is already seeing criticism of the major overhaul he designed for the ailing department store chain as a recent earnings call revealed substantial losses.
After leaving Apple in November 2011 to take the reins of the huge department store, Johnson looked to increase margins with the introduction of a new pricing model and unique retail ideas like the store-within-a-store, but customer response to the efforts fell flat, reports Reuters.
During its first quarter 2012 earnings call on Tuesday, JC Penney reported higher than expected losses with a 20.1 percent sales drop year-to-year causing shares to free fall 19.7 percent, the worst decline since the company began listing shares in 1929. The selloff erased $1.43 billion in market value and was the catalyst for a suspension of the stock's quarterly dividend of 20 cents per share.
JC Penney shares closed down $6.57 on Wednesday to end the day at $26.75, well below the $30.11 closing price seen the day before Johnson was named CEO in June 2011.
The company is in the midst of a multi-year plan to reinvigorate sales, though some analysts see the change as being largely ineffective. Spearheaded by Johnson, the new strategy involves the replacement of coupons and sales with "Every Day" low prices.
On Tuesday, Johnson told analysts that he stands by the changes but admits that JC Penney hasn't been successful in exposing customers to the new plan's benefits.
"It is not doing the hard work we need it to do right now," Johnson said of the company's advertising.
Previous commercials featured Ellen DeGeneres in attempt to contemporize the brand's image, but that effort was confused by a switch to ads dubbed "Do the Math" which illustrate how the chain's low prices outperform coupons and sales.
Ron Johnson at JC Penney's 'fresh air' event. | Source: JCPenney
Critics attribute the recent lack of foot traffic to the abrupt change in store policies, and claim that JC Penney customers who have become accustomed to the coupon and sale model are put off by the new "Every Day" pricing strategy.
The second step in Johnson's multi-pronged makeover will happen in August when the company's first store-within-a-store is opened. Upon completion, the transformation will put a number of 100 name brand boutiques in each JC Penney location. Announced designer collaborations include Vivienne Tam, Betsey Johnson and Michael Graves.
During his tenure at Apple, Johnson was responsible for the creation of the Apple Retail Store, which is a main component of the iPad maker's success and generated $4.4 billion in the last quarter alone.
After leaving Apple in November 2011 to take the reins of the huge department store, Johnson looked to increase margins with the introduction of a new pricing model and unique retail ideas like the store-within-a-store, but customer response to the efforts fell flat, reports Reuters.
During its first quarter 2012 earnings call on Tuesday, JC Penney reported higher than expected losses with a 20.1 percent sales drop year-to-year causing shares to free fall 19.7 percent, the worst decline since the company began listing shares in 1929. The selloff erased $1.43 billion in market value and was the catalyst for a suspension of the stock's quarterly dividend of 20 cents per share.
JC Penney shares closed down $6.57 on Wednesday to end the day at $26.75, well below the $30.11 closing price seen the day before Johnson was named CEO in June 2011.
The company is in the midst of a multi-year plan to reinvigorate sales, though some analysts see the change as being largely ineffective. Spearheaded by Johnson, the new strategy involves the replacement of coupons and sales with "Every Day" low prices.
On Tuesday, Johnson told analysts that he stands by the changes but admits that JC Penney hasn't been successful in exposing customers to the new plan's benefits.
"It is not doing the hard work we need it to do right now," Johnson said of the company's advertising.
Previous commercials featured Ellen DeGeneres in attempt to contemporize the brand's image, but that effort was confused by a switch to ads dubbed "Do the Math" which illustrate how the chain's low prices outperform coupons and sales.
Ron Johnson at JC Penney's 'fresh air' event. | Source: JCPenney
Critics attribute the recent lack of foot traffic to the abrupt change in store policies, and claim that JC Penney customers who have become accustomed to the coupon and sale model are put off by the new "Every Day" pricing strategy.
The second step in Johnson's multi-pronged makeover will happen in August when the company's first store-within-a-store is opened. Upon completion, the transformation will put a number of 100 name brand boutiques in each JC Penney location. Announced designer collaborations include Vivienne Tam, Betsey Johnson and Michael Graves.
During his tenure at Apple, Johnson was responsible for the creation of the Apple Retail Store, which is a main component of the iPad maker's success and generated $4.4 billion in the last quarter alone.
Comments
Just goes to show that you actually need a good product to sell, and all the marketing in the world, even if its good marketing, is not going to turn shit into gold. Which is why Apple employees/executives don't necessarily excel in future positions with other companies. This isn't Ron Johnson's fault, it just is what it is.
It is pretty self evident that Ron Johnson is the most talented person who could be CEO of JC Penney at this time. He might fail. But they should be glad he has come to try to save them and create some sort of relevance for JC Penney.
I think it's one of the most exciting stories in business today. Might buy a few shares just to keep track.
Actually a few women I know have noticed the changes in the store, like the changes and the products and plan to shop there a lot from now on. I told them that the guy who designed the Apple stores was responsible and they said "Ohhhhh!!!!! Now I get it. I'm definetely shopping there!"
If I were Ron Johnson, I'd stay the course. The biggest issue now is getting the word out.
That's a big ship to change course.. Not going to happen in the short amount of time he has been there. This is going to take years.
Product is the king, not a store that sells it.
Quote:
Originally Posted by dasanman69
The moral of the story boys and girls is that you can't polish shit, you can only spread it around.
The Mythbusters did in fact polish shit to a fairly high gloss. Myth/saying busted.
But we know what you really meant.
Sorry Ron, you can put lipstick on that pig but you can't sell it like an Apple
An Apple a day keep's the PC's away.....but a Penny spent doesn't necessarily mean a penny earned.
He changed their pricing strategy from coupons to low pricing. That changes buyers' mentality from getting a bargain on a valuable item to buying a cheap product. It may not have been the strategy alone that led to the losses but CEOs are paid a lot of money to ensure a strategic success. If a major strategy change is implemented and it makes the situation worse, it's going to be the target of scrutiny.
His comment about the advertising not working is probably accurate. You need to get the message across clearly. Just look at Blackberry and Samsung. Their campaigns mark out Apple as the market leader. In the following JC Penney ad, it seems like they make out sales to be a nuisance for customers:
Everyday low prices are good but you don't get rid of sales entirely because you take away the urgency to buy and then customers end up buying somewhere else that gives them that urgency.
It also helps if your website works and has information presented neatly. Don't have 1 giant banner and cram every subcategory into drop-down menus.
At this point, they have an even bigger problem though because now they have negative press and forecasts so they better turn it around quick or people are just going to keep piling it on.
Quote:
Originally Posted by Slurpy
Just goes to show that you actually need a good product to sell, and all the marketing in the world, even if its good marketing, is not going to turn shit into gold. Which is why Apple employees/executives don't necessarily excel in future positions with other companies. This isn't Ron Johnson's fault, it just is what it is.
^ This is pretty much what i was going to say but already to the point.
But… Apple products are nothing but the Ginsu knives of the tech world! The only thing that makes people buy low-end hardware at top-of-the-line prices is the marketing!
Quote:
Originally Posted by Hiro
The Mythbusters did in fact polish shit to a fairly high gloss. Myth/saying busted.
I chuckled. I searched it on a lark. It actually happened. My stars.
He brought in a lot of fresh ideas. I really thought he was making a difference... at least he made a difference in how I perceived JC Penny's. However, I really thought of his efforts as a multi-year effort... not something to be fixed in a few months or a quarter.
If there were one thing I find fault with, it's the reliance upon quarterly reports by most businesses. It makes long term change hard to bring about. Everything is too focused on the short term and an important balance is lost... Strategic planning often takes a year or more to begin to show it's impact. I think if the Apple stores had to show an impact within three months, they would have been closed overnight by the average company management... or they would have been stuffed with eyeball-bleeding banners and clowns with animal balloons to generate false traffic.
Is there really that little Apple news today? I think this story takes the prize for farthest stretch from actual Apple content this year.
1) As someone else pointed out, it takes time to turn an ocean liner.
2) This will alienate some of JCP's core customers, and I think that's already clear. The question is, will these changes bring in new customers? Actually, that's not true, it's very clear to me that the changes WILL bring in new customers, the question is whether or not they will make up for the lost ones.
I went shopping at JCP just a couple weeks ago, and I was very happy with the changes I saw. I absolutely HATE waiting around for some bullshit "sale" where the prices are marked up 25% and then marked down 40% from the marked-up price. I do not have patience to waste my time hunting through newspapers or flyers week after week after week to see if there's something "on sale" that I should run out and buy, to MAYBE "save" a few bucks.
So for me, this is a fantastic change. I will actually save money more often than not. When I'm looking for something that JCP is likely to carry I will be putting them near the top of the list of stores to visit. In our local mall there is a JCPenney, Macy's and Nordstrom. For the kind of items I would normally look for in Nordstrom, I don't think this will change anything, however, I will be much more likely to go to JCP than Macy's now.
It's fast to lose existing customers, it will take time to bring in new ones, but I think the customers that will prefer the new system are likely to be better customers for JCP in the long run. Not the ones who will only shop when they have a coupon in hand.
This will take some time to sort out. I think Johnson has probably rushed some of his plan too quickly, as he still has to get some of the other things in place. And I think the marketing message has been unclear, but that can be fixed quickly. Once those things take hold it will just be a matter of time until we know if the new customers are coming in quantities that justify the changes. I really, really hope they do, and I really hope that Johnson is given enough time to see this mission through.
I've said it before...Americans equate "good value" with "cheap!" as in cheap s**t. Apple is the exception to the rule. Except for Apple, American retail is dominated by Walmart and maybe Amazon. Cheap Chinese crap (Walmart), cheap crappy cars, (GM), cheap crappy software, (MS), cheap crappy drinks, (Cocoa Cola) cheap crappy food, (MacDonalds) cheap crappy PC's (HP & Dell), cheap crappy phones, (Moto, Nokia, etc.) cheap crappy beer, (Budwieser/inBev), cheap crappy Congress, (Congress).
P.S. Is it just me or is AI just about unusable on the iPhone? Helloooooooooooooo
How long did it take to turn Apple around again?
If I recall correctly, at every turn that Apple made after 1996, it was going to be doomed: see-through legacy-free iMacs, toilet-seat iBooks, a new operating system that was - UNIX?! -, a CD toaster (the infamous cube, and an actual flop), an MP3 player, retail stores - All "laughable" attempts that for sure were going to fail in the eyes of the pundits, and it took a long time for the market to realize that Apple's changed strategy wasn't suicide: after the dotcom crash, its stock price was around $6.60 - in 2003! That was almost 7 years after the Next acquisition, and 2 years after opening the first Apple Store. And all this when Apple was actually producing mostly hit products. Johnson will have to hang in there for a while... . For my part, I welcome the changed direction for JC Penney, now if there were only a store closer to where I live...
Oh, and fsck them pundits. The only thing they are good at is stock ejection due to premature evaluation.