Once considered a pioneer in large scale retailing, JC Penney has been on the ropes in recent times, with sagging sales, a new CEO at the helm and a major corporate overhaul underway.
The company’s third quarter same store sales declined 26%, which was much worse than the 17.9% drop expected by Wall Street analysts. Total revenue for the quarter came in more than 10% lower than the $3.27 billion analyst estimated, at $2.93 billion and the company did even worse with their bottom line. Analysts estimates for their net loss per share were just 7 cents, but their reported loss per share was a whopping 93 cents. The per share figures are what drives stock price and the company was penalized heavily by the market, with its stock down nearly 10% in early trading today.
Penny has struggled in recent years and announced a $900 million cost cutting strategy in January, which it expects to implement throughout 2012 and 2013. The company’s new CEO Ron Johnson, who has only been at the helm for a year, says Penney’s story is a, “tale of two companies,” with newly opened stores doing well, while older stores have had not fared well.
The company has even struggled in what looked to be a possible bright spot in their overall strategy, online sales. According to Internet Retailer magazine, in just three quarters of 2011 online revenue for JC Penney accounted for more than 8% of the company’s total revenue, and the company ranks as the 20th largest online retailer.
As promising as those figures seemed last year, this year has not been good for Penney’s online operations. As a matter of fact, the company’s strategy is so splintered one analyst, Brian Sozzi of NBG Productions said that J.C. Penney is the “only retailer I know where: (1) online sales are not growing; and (2) online sales are far removed from brick and mortar comps. Either way, the data says: J.C. Penney is not a top destination and is nowhere near becoming a top destination in peak seasonal shopping periods.”
Some analysts believe Penney’s biggest problem is an all out identity crisis, with no clear competitive advantage in the marketplace. Having once been a proponent of discounts and promotions, the company shifted their stated strategy to one they dubbed “fair and square” pricing. The idea was to abandon the constant mark downs, coupons and promotions and pull customers in with consistent, fair pricing. But, the company has changed in what look like knee jerk reactions to market share losses. They have run gift coupon promotions and just last month ran a 30% clearance promotion. All this back and forth in their communication to their customers about what to expect has left customers confused and the company struggling.
Until JC Penney decides who they want to be when they grow up they won’t be able to consistently attract customers to their stores and will continue to struggle. When senior management at the company sets a strategy, communicates it effectively to consumers, and sticks to it they may have a chance to make a comeback. Until that happens, most analyst and consumers expect to see the company continue to struggle.
