An advertisement just released by struggling retailer J.C. Penney (NYSE:JCP) is essentially an admission that the company made a huge mistake: the change in store policy that resulted in a 13 percent decrease in customer traffic and $4.3-billion-sales loss last year.
Over a backdrop of photographs of J.C. Penney locations from the retailer’s 111-year past, a woman’s voice spoke these words: “It’s no secret recently J.C. Penney changed.” As the photographs transition to video footage, depicting happy customers trying on clothing, the voice-over continued, noting that some of the changes customers liked and some they hated. But the important — take home message — of the commercial was that J.C. Penney learned a lesson, which was “to listen to you,” the customer.
“Come back to J.C. Penney,” concluded the ad. “We heard you, now we’d love to see you.”
Former Chief Executive Officer Ron Johnson’s efforts to steer J.C. Penney away from its image as a discounter — by transforming the retailer’s pricing structure to reflect everyday low prices rather than discounts and setting up clusters of small, designer boutiques — has failed thus far. Customers have left in droves, sales have plummeted, Johnson has been replaced, and the company’s financial straits have grown increasingly grim.
The company has even begun to backtrack. At the end of March, the retailer announced that it would be raising prices on its private-label brands so that it can offer discounts once more, a move aimed at improving margins and winning back shoppers. Around that time, Chief Financial Officer Ken Hannah said at Bank of America’s consumer and retail conference Wednesday that part of its strategy had been a “huge miss,” noting it had been a mistake to remove private-label items without offering alternatives. Even hedge fund manager William Ackman criticized the turnaround plan, and he invested $800 million in the retailer and handpicked the chief executive for the leadership role.
“One of the big mistakes was perhaps too much change too quickly without adequate testing on what the impact would be,” Ackman said at an investment conference sponsored by Thomson Reuters in April.
All this led to the replacement of Johnson by his predecessor Myron “Mike” Ullman, who appears to be distancing himself from the disastrous turnaround attempt with this new advertisement.
Investing Insights: Is Priceline Still a Winner?