department-stores
department-stores

Number 10: J.C. Penney's New Chief

Ron Johnson faces an uphill battle at the helm of the struggling retailer.

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WWD Year In Fashion issue 12/12/2011

What’s the vision?


That’s the question hanging over Ron Johnson, the new chief executive officer at J.C. Penney Co. who joined the lumbering department store in November from heading one of the hottest properties in town — Apple Retail. The industry was intrigued to see how he would take Penney’s and inject it with the cool, hip, jam-packed atmosphere of the Apple stores.


Instead, his moves so far have left the industry puzzled, if not confused.


He started off by recruiting some heavyweight new talent — luring them with large pay packages. He’s hired executives he’s worked with before. Michael Kramer, formerly ceo of Kellwood Co., has become chief operating officer, and Daniel Walker became chief talent officer, suggesting more executive changes down the road. Both previously worked with Johnson at Apple, and Walker had been consulting with Johnson on Penney’s human resources even before he officially joined the chain full time.


Earlier, Michael Francis, formerly of Target Corp., was named president, establishing him as second in command. Michael Ullman, former ceo, remains Penney’s chairman until February.


Those moves were applauded, but then things got puzzling. Johnson OK’d a change in Penney’s “high-low” pricing to something different, though details have not emerged — and vendors are both confused and complaining. While Penney’s doesn’t call it that, the new strategy appears to be everyday low pricing — one that failed for Wal-Mart. The move would see Penney’s reduce couponing — even though the retailer is a champion at it — and at the same time maintain some of its big sales promotions. The new strategy is expected to be unveiled on jcp.com in February and in the spring at Penney’s stores.

 

Johnson followed the price shift by stealing Martha Stewart from Macy’s, beginning in February 2013. Penney’s is taking almost a 17 percent stake in Martha Stewart Living Omnimedia and plans to create in-store shops and a Web site for her expansive collection. It was another aggressive move, but many analysts and even Allen Questrom, Penney’s and Macy’s former chairman, are questiosning its wisdom. Martha Stewart, while still having a following, is seen as a brand that’s lost luster in recent years and has bounced around from store to store. Stewart’s contract with Penney’s is for a decade, meaning she will be in her 80s when it expires.


Johnson plans to lay out more of his vision for Penney’s at a Jan. 25 analysts’ meeting in New York, though Kramer did give a clue, stating the vision will be a cross between Apple, Target and Macy’s. Some Seventh Avenue sources have said Penney’s is on the hunt for edgier brands that may not be national in scope or widely recognized but still meaningful. Competitors like Macy’s have made it difficult for Penney’s to secure solid brands with higher-grade quality. Sources have indicated Penney’s might even take a stake in brands — again indicating Johnson has plenty of cash to play with.


Johnson hasn’t exactly been shy about raising the level of excitement and the prospect for change. During a recent conference call, he told investors and retail analysts to expect big changes at Penney’s, which serves more than half of all American families annually.


“I’m not here to improve, I’m here to transform,” he said, recalling a speech he made at Penney’s Plano, Tex., headquarters on his official first day on the job. “It is time to assert leadership, reclaim our birthright and become America’s favorite store.”


Since the $18 billion retailer reported a net loss for the third quarter ended Oct. 29 of $143 million, and a comp-store sales drop of 1.6 percent, Johnson has a long way to go. Meanwhile, archrivals Macy’s Inc. and Kohl’s Corp., keep rolling along, reporting strong profits and sales and raising guidance for the year.


“I’m working with our team to rethink — really to reimagine — everything we do,” Johnson said during the call. “I’m investing considerable energy in a strategic review of our product, our pricing and our promotional strategies in order to create an exceptional, a new and a better way for people to shop.”


As they say: the proof is in the pudding.

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