While Dillard’s changes to its business were more subtle, they were effective and involved making refinements that were not severely disruptive to the business. Among other drastic changes, JC Penney has completely altered its merchandising in an attempt to draw in a new, younger customer, but in doing so, has put product into the stores that do not resonate with its core customer. The company has abandoned portions of its core business, including St. John’s Bay and its home business. These segments received little advertising and merchandising support all year in spite of their historically high share of sales. Put simply, the company has attempted to do too much at one time in an effort to completely change its business and customer. The result thus far has been a decline in comp store sales, earnings and share price that is far greater than anyone could have reasonably anticipated.
A Shy at Target Corporation (NYSE:TGT)
Target is another supreme example of a retailer who is continuously facing challenges with respect to its merchandise focus. One recent example of a merchandise misstep was when the company rolled out its special Holiday selection in conjunction with Neiman Marcus in late 2012. The price points of the products offered and seemingly fragmented selection of merchandise categories clearly did not resonate with the Target customer. As a result, the rollout was not as impactful as initially hoped. Target reported flat same store sales for the month of December, and the merchandise selection was later marked down as much as 70% off.
Foolish Bottom Line
Through the help of examples, we can see how different stocks can become nightmares for investors just because of a step taken in the wrong direction.
The article What to Change: Merchandise or Merchandising? originally appeared on Fool.com and is written by Masam Abbas.
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