Latest earnings report suggests "back to the future" strategy has worked
of ConsumerAffairs
J.C. Penney, a retailer once left for dead, is turning heads on Wall Street, perhaps because it has regained the respect of consumers on Main Street.
The proof was delivered in the company's fourth quarter and full-year earnings report late Thursday. Comparable store sales grew 4.1 % for the fourth quarter and 4.5 % for the full year.
The company said the combination of strong sales growth, better profit margins, and disciplined expense reduction resulted in full year adjusted earnings of $715 million, a $435 million increase.
"We are very pleased with our performance for the fourth quarter and full year,” J.C. Penney CEO Marvin Ellison said in a press release announcing the earnings. “Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment.”
Disastrous makeover recovery
Ellison probably has every right to be pleased since the company suffered what can only be described as a disastrous makeover and customer revolt just four years ago. For those who don't recall those events, here's what happened.
At the urging of activist board member Bill Ackman, J.C. Penney at the beginning of 2012 abandoned its long tradition of serving a middle class, middle aged, and middle-of-the-road consumer. The company hoped to replace that J.C. Penney customer with one who was younger and cooler.
It changed its brand to JCP and launched its offensive with the TV commercial below, which few people understood but old J.C. Penney customers universally hated.
Complaints
Complaints from long-time Penneys customers poured in to ConsumerAffairs.
"This is the worst ad of all time, stop it immediately," wrote Kathy, of Hillsboro, Ore. "We will boycott J.C. Penney until it offers an apology to all its customers!"
"I am complaining about the obnoxious television commercial aired announcing your new pricing campaign," wrote Carole, of Lakewood, Calif. "It has to be one of the most irritating, annoying commercials ever created for television. If you think this will make anyone shop at your stores, you are mistaken as far as I'm concerned.”
What Kathy and Carole didn't understand was that the ad was probably designed to evoke that reaction in them. To many industry observers, Penneys appeared to be firing its customers, with plans to replace them.
The old customers left, but the hoped-for new ones didn't arrive, at least not in the necessary numbers. Just over a year later, amid mounting losses, J.C. Penney went back to the future, reinstalling its former CEO and returning to many of its previous pricing and operational policies.
Enough of its customers have returned that the company now appears to be back on its feet. In fact, it's doing better than some of its rivals like Macy's and Sears, that have struggled in the increasingly tough retail environment.