But company CEO vows to stay the course
of ConsumerAffairs
At the beginning of 2012 retailer J.C. Penney, under the new leadership of CEO Ron Johnson, embarked on a number of bold, dramatic changes. The reaction from many long-time Penney's customers was not overly positive.
Since then the company has struggled and now reports it lost $81 million, or 37 cents a share, in the second quarter of the year. That's on top of the $163 million the department store chain lost in the first quarter. The second quarter loss would have been even steeper if not for the sale of some company assets during the period.
"We have now completed the first six months of our transformation and while business continues to be softer than anticipated, we are confident the transformation of J.C. Penney is on track," Johnson said. "The transition from a highly promotional business model to one based on everyday value will take time and we will stay the course."
Alienated consumers
From the start, many existing Penney's customers objected to the changes initiated under Johnson's new regime. In particular customers questioned why Penney's would do away with its sales and coupon promotions. The "fair and square" pricing system seemed to confuse some. Others objected to the company's television advertising.
Complaints to ConsumerAffairs, however, have tapered off in recent months, suggesting that angry consumers who vowed to stop shopping at Penney's have been true to their word. And the falling sales suggest that could be the case.
Perhaps more significant than the quarterly loss, J.C. Penney withdrew its guidance -- its expectations for the rest of the year to guide Wall Street investors. But rather than revising the guidance, as is common on Wall Street, it did not offer a new number. Back in May the company said it expected to earn $2.16 a share for the year.
Doubling-down
In June, amid falling sales, Johnson backtracked a bit, reinstating periodic sales at Penney's stores. Despite that concession, the company appears to be doubling-down on its transformational course.
"We continue to learn and adjust, and fully expect that our unique, specialty department store experience will drive J.C. Penney's long-term success," he said. "Our rock solid balance sheet will support the execution of our transformation and position us for growth beginning in 2013."
Perhaps, but there are plenty of doubters on Wall Street. Goldman Sachs analyst Adrianne Shapira told Forbes the company lacks "meaningful traffic drivers" without coupons and she was not surprised Penney's was forced to "retract what proved to be overly optimistic initial guidance.”