J.C. Penney Company, Inc. (JCP): Addiction Renewed

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J.C. Penney Company, Inc.J.C. Penney Company, Inc. (NYSE:JCP)
is riding a rare wave of good news. Shares soared over 11% upon news that George Soros purchased a minority stake. Then came a $1.75 billion loan from Goldman Sachs Group, Inc. (NYSE:GS). And an appeals court ruled in J.C. Penney Company, Inc. (NYSE:JCP)’s favor regarding a product injunction.

But will the good wash away the bad? Last month, CEO Ron Johnson was pushed out after 17 months when his Apple-bred methods of brand identity fell flat. Former CEO Myron Ullman has stepped back into place, and the company’s airing contrite commercials begging for customer forgiveness.

So things are going back to normal for J.C. Penney Company, Inc. (NYSE:JCP), but that’s not a good thing. Johnson’s mid-strategy removal further highlights JCP’s core problem — a lack of clear identity.

Source: Sam Howzit

Addiction renewed

Johnson’s swift removal was due to an equally stunning drop in the number of customers coming through the door. His fatal mistake was cutting the company’s generous coupon offerings, which he famously compared to drugs, in favor of lowered everyday tag prices. Johnson discovered that customers prefer an obvious display of savings via coupon over a simple tag price.

Coupons will play a major role in J.C. Penney Company, Inc. (NYSE:JCP)’s “Please Come Back” tour. But what will returning customers find when they step through the door?

Johnson didn’t take a slow approach to his conversion of stores to the Genius Bar-esque brand modules. The company can’t simply go into one or two test stores and change them back. As of November, about 11% of JCP stores were remade in the Johnson model. For a company dealing with financial issues, that would make for a large percentage of do-overs. There’s also the fact that the older model clearly wasn’t working before or Johnson wouldn’t have come aboard.

The company could stick with Johnson’s module plans, which were showing double the sales per square foot as the traditional stores. And the return of coupons might drive that number higher.

Regardless of the company’s immediate layout plans, someone needs to look at what customers will find if they do come through the door.

Barely branded

Johnson’s original brand modules revolved around J.C. Penney Company, Inc. (NYSE:JCP) mainstays including Levi’s, Izod, and Liz Claiborne. But the company has most recently made headlines thanks to a battle over products from Martha Stewart Living Omnimedia, Inc. (NYSE:MSO).

Macy’s, Inc. (NYSE:M)
went to the courts to defend its Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) contracts for bedding, tableware, and bath products. Trials are slow affairs and for the time being, JCP can sell its Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) products in those categories — assuming they don’t actually use her name in their promotion.

It’s better than the $100 million hit J.C. Penney Company, Inc. (NYSE:JCP) would’ve taken if Macy’s, Inc. (NYSE:M) had won the injunction requesting the pull of products until the trial’s end. But taking the celebrity name off the celebrity line kind of removes the point of having the products in the first place. It’s true that JCP will have Martha products beyond those categories.

But J.C. Penney Company, Inc. (NYSE:JCP) needs to do more than extend the brand of a competing store that often resides in the same mall space. The company should look to Target Corporation (NYSE:TGT)’s success with designer label, limited run offerings for tips on revitalizing a tired location.

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