The J.C.Penney Disaster
I've found myself fascinated by the ongoing J.C.Penney overhaul saga since CEO Ron Johnson took the helm last November. For those that haven't been following it, Ron Johnson was the mastermind behind Apple's retail operations, and previously worked as a Vice President of Merchandising at Target.
He pioneered the concept of Apple's retail stores and its Genius Bars. Under his watch, Apple's retail operations achieved over a billion dollars in sales within its first two years of existence.
After seven and a half years at Apple, he moved to J.C. Penney as its new CEO. His mission: to transform J.C.Penney into a modern department store powerhouse.
Nearly a year in, the results of his overhaul can best be described as a total disaster.
Now, I imagine most everyone reading this has spent time in an Apple store and is intimately familiar with the Apple brand. The J.C.Penney brand, I imagine, is a lot more foreign. I asked a friend of mine who used to cover retail companies at one of the big banks to give me a quick overview of the brand and its customer base. Her comments boiled down to this:
JCP, at its heart, is a department store that sells no frills, value priced items to value oriented customers. Its customers aren't particularly hip or fashion forward, rather, they are the types of consumers who keep things basic and appreciate a good deal.
Now, obviously this is generalizing a bit. But, even so, does that sound like your typical Apple customer at all?
Not even close.
Ron Johnson's entire overhaul was seemingly created with total disregard for the people who actually shop at J.C. Penney. Let's take a look at a few of the major facets of his plan and analyze them through the lens of a typical JCP customer:
- The New Logo - As you can see in the image attached to this post, JCP's newest logo is very clean and very modern. I mean, look at the effective use of white space! The evocations of the American flag! Now, that's all well and great, but it's also the Company's third logo in as many years. I suppose it was at least a bold move to show the consumer that change is coming, whether or not they were asking for it.
- The End of Promotions aka the Death of Coupons - "Fair and Square" pricing was introduced, with the end of constant sales, the introduction of consistent low prices, and the best prices on everything available on the first and third Friday of each month. Now, this might sound like a neat idea. You might even like the sound of it yourself since, on the surface, it seems to deliver the best value to the customer without the need for gimmicky sales and a deluge of coupons. You, however, are not the typical JCP customer. They are not looking for "fair and square" and everyday low prices. If they were, they'd go to Wal-Mart. No, they very much enjoy their coupons and were both confused and angry when they came to a halt.
- Their New Advertising Campaign - If you spent any time watching the Olympics, I'm sure you saw a few JCP ads. And, if you're anything like me, you have absolutely no idea what they were trying to do with their ads. If anything, I expect them to be advertising for Target, not JCP. Not to mention, they're use of gay couples and gay parents in their ads simply makes no sense. Don't get me wrong, I'm as pro-gay rights as they come, but your average JCP customer probably doesn't want to see a two dad family as the face of one of their fathers' day advertisements. Again, it's as though Ron Johnson believes that Apple's customers shop at JCP.
The overhaul of J.C.Penney has been a complete disaster. Through his attempt to reshape the company from the inside-out, Ron Johnson has shunned JCP's core customer base, failed to attract new customers, and upset the company's rank and file.
Last week, JCP announced earnings for one of the company's worst quarters in its history. Sales dropped 23%, same-store-sales dropped 22%, and internet sales dropped 33%. You'd expect the CEO to be conciliatory, downtrodden, or perhaps defensive. As Business Insider outlined earlier this week, Ron Johnson simply seemed delusional, claiming that the company's transformation is on track, and that floor traffic being down 7% year over year equals progress. Again, a total disaster.
Now, obviously this is a very high-level look at things, and perhaps his vision simply needs more time to take root. But, I'm highly skeptical. Plus, if any department store brand is in need of this drastic of an overhaul, its Sears, not J.C.Penney. But, I think we all know that Eddie Lampert wouldn't let that happen on his watch.
Comments
interesting...i was actually
interesting...i was actually wondering what the status of this "transformation" was....I guess a really good example of not "knowing your audience".
but maybe it's too early? unlikely....are they profitable?
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Roaming checkouts at a store
Roaming checkouts at a store like JCP sound like the dumbest thing ever.
Eddie Lampert is a wall
Eddie Lampert is a wall street legend. Did you ever hear the story about him being kidnapped after work one night?
Interesting that Bill Ackman
Interesting that Bill Ackman believes that JCP is going to turn around and is headed higher. His presentation on why he believes the company is a winner: http://www.scribd.com/doc/94429141/Bill-Ackman-s-I...
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All we need for retail
All we need for retail giants:
--clothes--
mid-market: Macy's
higher end: Saks
--misc shit--
mid-market: Wal-mart
higher end: Target
The rest is just noise.
"A man generally has two reasons for doing anything. One that sounds good, and the real one." - J.P. Morgan
I think that for one to
I think that for one to really believe that JCP will bottom out and then shoot upwards, you really need to think it'll become a higher-end version of Target. Frankly, I'm not sure I see this working because it would require a major shift in its customer-base.
Now, with that said, I don't want to sound like some master prognosticator here. Either way, I think the story is really interesting to follow and its not often that you get to follow this big of an overhaul at such a big, storied company, that happens in such a short period of time.
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Its a huge undertaking, one
Its a huge undertaking, one that by Ackman's estimation will take years to complete. Will I ever shop at a JC Penny? Probably not.
However, Bill Ackman is a boss; so I want to believe he'll be successful with this. I really enjoyed his fact about how much time corporate employees spend on youtube and netflix to show that there is fat to be cut.
TheKing: I think that for one
I think that for one to really believe that JCP will bottom out and then shoot upwards, you really need to think it'll become a higher-end version of Target. Frankly, I'm not sure I see this working because it would require a major shift in its customer-base.
Now, with that said, I don't want to sound like some master prognosticator here. Either way, I think the story is really interesting to follow and its not often that you get to follow this big of an overhaul at such a big, storied company, that happens in such a short period of time.
Ok, but if you had to buy puts or calls here, sounds like you'd be in the put camp. How long before you see them go Chapter 11? 2015?
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WallStreetOasis.com: TheKin
I think that for one to really believe that JCP will bottom out and then shoot upwards, you really need to think it'll become a higher-end version of Target. Frankly, I'm not sure I see this working because it would require a major shift in its customer-base.
Now, with that said, I don't want to sound like some master prognosticator here. Either way, I think the story is really interesting to follow and its not often that you get to follow this big of an overhaul at such a big, storied company, that happens in such a short period of time.
Ok, but if you had to buy puts or calls here, sounds like you'd be in the put camp. How long before you see them go Chapter 11? 2015?
Sooner, hopefully.
Febreeze: WallStreetOasis.c
I think that for one to really believe that JCP will bottom out and then shoot upwards, you really need to think it'll become a higher-end version of Target. Frankly, I'm not sure I see this working because it would require a major shift in its customer-base.
Now, with that said, I don't want to sound like some master prognosticator here. Either way, I think the story is really interesting to follow and its not often that you get to follow this big of an overhaul at such a big, storied company, that happens in such a short period of time.
Ok, but if you had to buy puts or calls here, sounds like you'd be in the put camp. How long before you see them go Chapter 11? 2015?
Sooner, hopefully.
Doubt that...$1b Cash & equivalents, 1.75b available on credit facility, $200mm maturities through 2015, looks like a pretty decent liquidity runway to me. I like the long dated senior notes and see a re-org if anything , not a liquidiation. There's still close to 5B of equity there so they would have to burn cash for the next 18 months at least in my opinion to start considering dire options.
Apparently Ackman's already
Apparently Ackman's already made 16x his money.
Bigtime44: Febreeze: Wall
I think that for one to really believe that JCP will bottom out and then shoot upwards, you really need to think it'll become a higher-end version of Target. Frankly, I'm not sure I see this working because it would require a major shift in its customer-base.
Now, with that said, I don't want to sound like some master prognosticator here. Either way, I think the story is really interesting to follow and its not often that you get to follow this big of an overhaul at such a big, storied company, that happens in such a short period of time.
Ok, but if you had to buy puts or calls here, sounds like you'd be in the put camp. How long before you see them go Chapter 11? 2015?
Sooner, hopefully.
Doubt that...$1b Cash & equivalents, 1.75b available on credit facility, $200mm maturities through 2015, looks like a pretty decent liquidity runway to me. I like the long dated senior notes and see a re-org if anything , not a liquidiation. There's still close to 5B of equity there so they would have to burn cash for the next 18 months at least in my opinion to start considering dire options.
Groupon also has $1B Cash & Equivalents, but I'm hoping they bite the dust in that time frame.
"A man generally has two reasons for doing anything. One that sounds good, and the real one." - J.P. Morgan
Haha come on man...
Haha come on man...
BTbanker: All we need for
All we need for retail giants:
--clothes--
mid-market: Macy's
higher end: Saks
--misc shit--
mid-market: Wal-mart
higher end: Target
The rest is just noise.
I think even Macy's and Sak's (along with Bloomie's and Neiman) are becoming increasingly superfluous. They rarely have a decent selection for any given item and half the time you can forget about getting your size ("I'm sorry sir, we only have those pants in a size 27 and a size 46 currently"). There was a time when you needed a brick and mortar to try things on and test things out, but with all these online retailers offering no-hassle returns, made-to-measure options, and user reviews that's a thing of the past. Look for JCP, Bloomie's, Macy's et al. to go the way of their brick and mortar cousins in the electronics and media sectors (i.e. Borders, Circuit City, Best Buy) over the next 5-10 years.
labanker: BTbanker: All we
All we need for retail giants:
--clothes--
mid-market: Macy's
higher end: Saks
--misc shit--
mid-market: Wal-mart
higher end: Target
The rest is just noise.
I think even Macy's and Sak's (along with Bloomie's and Neiman) are becoming increasingly superfluous. They rarely have a decent selection for any given item and half the time you can forget about getting your size ("I'm sorry sir, we only have those pants in a size 27 and a size 46 currently"). There was a time when you needed a brick and mortar to try things on and test things out, but with all these online retailers offering no-hassle returns, made-to-measure options, and user reviews that's a thing of the past. Look for JCP, Bloomie's, Macy's et al. to go the way of their brick and mortar cousins in the electronics and media sectors (i.e. Borders, Circuit City, Best Buy) over the next 5-10 years.
Totally agree. I don't shop at any of those stores haha.
"A man generally has two reasons for doing anything. One that sounds good, and the real one." - J.P. Morgan
You have to think, though -
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I don't see a rebound for JC
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but they're giving away free
I've been following JCP on
JCP has negative brand
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JulianRobertson: I've been
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Why would anyone shop at JCP
Isn't part of the change in
mackie09: Isn't part of the
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SirTradesaLot: mackie09: Is
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imo maceys >> kohls >> jcp >>