Company continues to alienate old customers without drawing new ones
of ConsumerAffairs
Since taking over as CEO at JC Penney, Ron Johnson has made it his stated goal to transform the stodgy retailer into the next big thing. The transformation began in January with edgy commercials and a new pricing structure that did away with sales and coupons.
So how's that working out?
It's fair to say it has yet to catch fire. JC Penney reported its third-quarter results today, showing a 26 percent decline in sales. Wall Street was prepared for a decline of 18 percent.
Third-quarter results
The company lost $123 million, or 56 cents a share in the July through September period. The loss was much bigger excluding one-time items. Revenue totaled $2.93 billion, but the Street was expecting $3.27 billion. If Wall Street was surprised by the showing, many long-time Penney's customers, and former customers who have railed against the changes these last 10 months, weren't.
"I have been buying jeans from JC Penney for as long as I can remember. I've been getting bombarded by emails for months now saying how great the new JC Penney is. My daughter and I went to get some jeans last night and were shocked at an empty-looking store," Christopher, of Hernado, Miss., wrote in a ConsumerAffairs post. "I was even more shocked about the tiny selection of clothes there was to purchase. The jean selection was the worst. JC Penney has lost a customer for good. Whoever decided to do the revamp should be fired."
Barbara, of Mechanicsville, Md., who also describes herself as a long-time Penney's customer, was turned off by the changes in her local store.
"I received an email from the new CEO about all the good things that were coming," she wrote to ConsumerAffairs. "This week, I went back to the store in California, Md., to again look for clothes for my husband. There was even less than a few months ago. When I looked for underwear for him, I found that same package of boxer shorts and no more new ones. I talked to a sales person and was told that she thought the company was targeting a younger customer base. Well, JC Penney, you should be a company for all ages. I will not come again to shop."
New concept
Johnson makes no secret that Penney's is looking for new customers who are attracted to his concept of transforming Penney's stores into a collection of small boutiques under one roof. In a statement, he says Penney's is "a tale of two companies."
"By far the largest part of our store is the old jcp, which continues to struggle and experience significant challenges as evidenced by our third quarter results," Johnson said. "However, the new jcp, centered around the shop concept, is gaining traction with customers every day and is surpassing our own expectations in terms of sales productivity which continues to give us confidence in our long-term business model."
During the quarter, Penney's opened shops under the Levi's , Izod, Liz Claiborne, The Original Arizona Jean Co., and jcp brands. The company also opened 38 Sephora inside jcpenney stores, bringing the total to 386. Yet the shops remain a small part of overall sales.
Johnson said he's confident that, given enough time, the shops concept will catch on and Penney's will attract a new set of customers who will return the company to profitability.