J.C. Penney’s Layoff Bloodbath Continues
Rumors that struggling retailer J.C. Penney (NYSE:JCP) will be cutting costs by cutting staff at its home office in Plano, Texas, began surfacing earlier this month. Since then, the layoffs have become known to employees as the “St. Valentine’s Day Massacre,” referencing a prohibition-era gangster killing spree of the same name.
While originally slated to occur the same week as Valentine’s Day, the company’s pink-slip massacre has come a week later. And, as the New York Post reported Friday, it may be bloodier than expected. So far, CEO Ron Johnson decided to cut 300 workers at the retailer’s headquarters, representing about 10 percent of its workforce at that office.
The chief executive turned to layoffs to offset the company’s increasingly terrible sales, which were the result of a botched turn-around plan. He envisioned a company that could offer everyday low prices and boost its offerings with a wide range of small boutiques from designers like Levi’s or Sephora. But his attempt to revitalize the chain and transform the business, from pricing to customer experience, has apparently failed, and it looks like it will never happen.
His changes to the company’s pricing structure – which eliminated coupons and massive sales in favor of broadly lower prices — drove customers away instead of drawing them in. Sales dropped 23 percent since he cut prices last February. In its most-recent quarter, the company reported a larger-than-expected loss of $123 million, and it has shed nearly $5 billion in market capitalization since February 1, 2012. One year has passed since the new pricing structure was implemented, and J.C. Penney’s future looks grimmer than ever…
The layoffs, which will leave J.C. Penney’s headquarters with less than half the workers it employed when Johnson took over in late 2011, have included a team of 20 fashion-trend watchers, several clothing designers, and 75 workers in the company’s legal, human-resources and information-technology departments, according to the Post. Further cuts may come on Friday, and the layoffs may continue into the next several week, a source told the publication.
Several insiders have questioned whether the timing of the layoffs were meant to coincide with the beginning of the legal battle between Macy’s (NYSE:M) and J.C. Penney over the right to sell Martha Stewart merchandise. Penney’s spent $40 million to launch Martha Stewart Living Omnimedia (NYSE:MSO) as one of its inter-store boutiques, but Macy’s claims that the deal violates its own licensing agreement.
“The remaining employees can’t help but wonder if the timing has anything to do with the Martha Stewart trial,” one Plano worker told The Post. “Maybe upper management is hoping that the press will be looking in that direction and won’t notice what is happening back in Plano,” the employee added. But the press did notice, and the St. Valentine’s Day Massacre moniker has become synonymous with the company’s fortunes in general…