J.C. Penney sales are back

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NEW YORK J.C. Penney (JCP) is bringing back sales.

The struggling department store chain this week is rolling out some of the hundreds of sales it ditched last year in hopes of luring back shoppers who were turned off when the discounts disappeared.

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Penney also plans to add new price tags or signs for more than half of its merchandise to show customers how much they're saving by shopping at the mid-priced chain - a strategy that a few other retailers such as home decor chain Crate and Barrel and the company that owns TJ Maxx, HomeGoods and Marshalls. For store branded items such as Arizona, Penney will show on store signs a comparison of prices from competitors.

The moves are a departure for Penney on the eve of the one-year anniversary when it vowed to almost completely get rid of the sales that Americans covet but that cut into a store's profits. The idea was to offer everyday low prices that customers could consistently count on rather than the nearly 600 fleeting discounts, coupons and sales it once offered.

The bold plan has been closely watched by others in the retail industry, which is notorious for offering deep discounts to draw shoppers. But so far the experiment has served as a cautionary tale of how difficult it is to change shopper' habits: Penney next month is expected to report its fourth consecutive quarter of big sales drops and profit losses. After losing more than half of its value, Penney stock is trading at around $18. And the company's credit ratings are in junk status.

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J.C. Penney customers to get best prices year-round

CEO Ron Johnson, who rolled out the pricing plan shortly after taking the top job in November 2011, told The Associated Press last week that the latest moves are not a "deviation" from his strategy but rather an "evolution." He also vowed he would not be bringing back coupons.

"Our sales have gone backward a little more than we expected, but that doesn't change the vision or the strategy," said Johnson, who previously masterminded Apple's (AAPL) retail stores and Target's (TGT) cheap chic fashion strategy. "We made changes and we learned an incredible amount. That is what's informing our tactics as we go forward."

But critics say that Johnson is backpedaling. Walter Loeb, a New York-based retail consultant, said Johnson "is now realizing that he has to be more promotional to attract shoppers."

This pricing strategy has been a key part of Johnson's plan to reinvent Penney from the ground up that also included adding hip new brands such as Joe Fresh and replacing racks of clothing with small shops-within-stores by 2015. But this isn't the first time the plan has been tweaked it.

The pricing plan, which was rolled out in February 2012, entailed permanently slashing prices on everything in the store by 40 percent. Instead of the 600 or so sales and coupons it used to offer, Penney would hold just 12 monthlong sales events on some merchandise. And there would be periodic clearance events throughout the year.

But the plan wasn't well received on Wall Street or Main Street, so six months after launching it, Johnson ditched the monthlong sales, saying that they were too confusing to shoppers. Johnson said Penney since has learned that people don't shop on a monthly basis, but rather they buy when they need something for say, back-to-school or during the winter holidays. And during those times, he says, they're looking for even more value.

"I still believe that the customer knows the right price, but they want help," he says.

Penney declined to say how many sales events it will offer going forward, citing competitive reasons. But the company said the figure will be well below the nearly 600 that it used to offer. The company said the discounts will vary depending on the sale. From Feb. 1 through Feb. 14, for instance, shoppers will get 20 percent off some jewelry for Valentine's Day. One example: half carat diamond heart pendants will have a sale price of $96. Penny's everyday price was $120.

Penney said the decision to add tags on much of its merchandise that shows the "manufacturer's suggested retail price" along with Penney's "everyday" price came about because he realized that shoppers wanted a reference price. National brands were also asking Penney to show the suggested price to shoppers, he said. Penney started to test showing the suggested price on Izod men's merchandise last fall, and was encouraged by the sales.

Burt Flickinger, a retail consultant, said the move could help Penney because manufacturers' suggested retail prices can be as much as 40 percent higher than what retailers would end up selling it for. That practice of marketing suggested prices with their own price is common in the home appliance industry because shoppers like a reference price for items they don't buy often. But it's spotty with the department industry because stores generally hike prices up even more to give shoppers an illusion of a big discount, says Flickinger.

"The strategy will be helpful for shoppers to understand lower prices. At the same time, it will be tough to get consumers back in the store from competitors," said Flickinger.

But Craig Johnson, another retail consultant, said adding the suggested manufacturer's price is just a gimmick. "The objective of this exercise is to maximize the perceived value for the purchase," he said.

Johnson says Penney will submit supporting data to its legal team for approval before it advertises its prices, using certain criteria. For example, they'll make sure the fabric used is of the same quality as its rivals. For jewelry, Penney is using the International Gemological Institute, a third-party appraiser.

Penney says it will not show comparison prices for merchandise that is part of exclusive partnerships with brands such as Nicole Miller and Mango. Penney said it's difficult to offer such references.

"There are no makeup prices here," he added. "It's all about trying to communicate what it's worth to the customer

To promote the strategy, Penney will start airing TV, print and digital ads. One TV ad compares a $9 polo shirt under its store brand Arizona with $19 "elsewhere." "Two polos, same color, same vibrant, same details, same swing, same swagger, different prices," the ad says.

Going forward, Johnson reiterated that he expects Penney to return to growth sometime in 2013. That would be a welcome change for Penney, whose business has suffered under the new strategy.

For the first nine months of its current fiscal year, Penney lost $433 million, or $1.98 per share compared with a loss of $65 million, or 30 cents per share in the year-ago period. Total sales dropped 23.1 percent to $9.1 billion.

Johnson declined to comment on holiday sales. But analysts expect a loss of 17 cents on sales of $4.22 billion for the fourth quarter. That would mean the company's annual sales shrunk by 23 percent, or nearly $4 billion, to $13.3 billion for the latest year. Revenue at stores opened at least a year are expected to drop 25 percent, in line with the third quarter, according to analyst polled by research firm FactSet.

"A year ago, we were launching a major transformation and didn't know what to expect," he said. "Today, I know what happened. Our team has a year's worth of history. This is going to be a great year because the new JCP is coming to life for customers."

[stevenjdub]

The issue is not only that tjhe prices actually went up 15-20% on the new pricing strategy, its what he did when he laid off a long time work staff and took the remainder...may of which that had worked there 20+ years and reduced them to part time wages so tha they would lose their pensions and health insurance...

This CEO only has a concern for making a name for himself and taking down anything that can stand in his way, made up or not.

I have personally come across tons of folks who actually thought the new pricing startegy was a good deal until I did the math for each and everyone of them showing the new everyday low prices are approx 10% higher than previous sale prices and then with no coupon, items can be as more as 20% or even drastically more in terms of furniture and home goods.

Beware consumer. I am a lifelong JC Penney customer and a fan of the original James Cash Penney model of taking care of people and being a blessing and allowing God to bless your business because of it. Just about everything in my closets, windowns and bed it all from Penney's...I am only upset that after all these years of shopping there that I now have to come up with new avenues to shop in for all of my needs as well as my family's. Shame on you Mr. Johnson, you are a digrace to the human race and I caution everyone to realize that this is not the honest retailer it once was but has been hostily taken over by folks hell bent on destroying it and the people that rely on their retirenemnt checks from them (BTW, I am not one of them and this is an honest comment).

[kf2686]

I completely agree with LADYINWAITING. i used to work at that hole too. so many things went wrong there. From the first day of completely retagging the ENTIRE store with this new "strategy" i knew it was a joke and wouldnt work. People arent stupid, and Johnson claimed that jcpenney shoppers were like drug addicts!! what kind of idiot who wants to INCREASE company sales, profits and customers goes right out and calls the people who support the company and in reality, write the checks. The thing about the homosexual agenda total blew my mind. How can you possibly target this group?! its like a small percentage of the population, and to add to that, theyll die off from diseases before they can become a consistent customer. This company has gone straight down the toilet into the crap camp since Johnson took over. its destined to fail, hes done too much irreversable damage to recoop from.

[ladyinwaiting322]

I used to work at Penney's and the reason you can't get any cashiers/customer service is because they permanently laid-off all the people who actually DO/DID the work, to pay Mr. Apple (aka Ron Johnson). Long time employees who had worked their way up the pay scale and had 'benefits' are all but completely gone. Most were not replaced, and the only hiring they have done is for minimum wage people who bring a minimum-wage-mindset to the customers. The greatest thing about our local store was the PEOPLE. This guy doesn't get it. He pours millions of dollars into his little 'shops' and there is no one around to help the customers except a little 'technology' bar with computers telling you what kind of jeans should fit you. He is trying to appeal to the Old Navy generation, and THAT is not the core business of Penney's. He has effectively driven AWAY all that company's core business. Basically he has turned the business into one that is anti-seniors & middle-age, to pro-gay and label snobs. While Ron Johnson is at the helm, I won't spend a single dime at Penneys. He has single-handedly ruined an American icon of a business. Another great American company bites the dust at the hands of a so-called visionary. WHY the Board of Directors and stock-holders are putting up with this moron who thinks you can run a retail department store like an Apple store amazes me. I don't think he did Target any kind of favor either. My local Target store used to have a much better selection, now it is mostly groceries. "I" don't buy groceries at Target. Make up your mind, which nitch do you want to fill? Are you a grocery store or are you going to sell toys at Christmas??? This past Christmas Target had a terrible selection of toys (I used to buy there a lot). Target is a Wal-Mart wannabe without the Wal-Mart ability to crush suppliers into giving them discounts that barely keep those suppliers in business. They have just joined the ranks of the bad retailers that nobody really WANTS to give their business to any more.
And I disagree with the poster about the quality of Kohl's. They sell the same stuff as Penney's DID. It's just that they jack it up and you have to wait for sales!

[ladyinwaiting322]

One more note to retailers in general. We have an AGING society. The baby-boomers still 'drive' the economy and now THEIR kids are aging. Who gave you the idea that you should be marketing to young adults? THEY don't have any money ... they don't have jobs. The money comes from their parents and/or grandparents. These middle-aged to older women no longer wear short skirts and halter dresses. They want short sleeved turtlenecks to hide the aging areas of their bodies. Comfortable, affordable, and attractive 'classic' clothing. The men need pants with larger waist bands that don't LOOK like the pants their grandfathers used to have to wear suspenders to keep up. Older bodies with younger mind-sets abound. Where are your heads? Forget the 'future' generation, sell to the here and NOW. Besides, that 'future' generation is going to get to where we are hopefully, and want what the majority want NOW, and you'll never go out of business marketing to people with the 'classics'.

[Iagreewiththepeople]

Well I stopped buying from JCPenney's when they arbitrarily took my credit line from $2000 down to $121.00. My balance was zero at the time too. I was never late, didn't go over my limit , was a customer for 12 years. Not to mention that they are a tad bit expensive, I have to go to the mall. If I wanted to be insulted I would just shop at Savers. They lost my business for their bad business practice. Now my friends and I shop at Sears, Macy's, Ebay even Walmart before I would shop at Penney's again. I loved their stuff. But business is business. So gay or straight..they hate.

[katie5280]

I have no issue with Penneys, I just don't go to the mall that often. I know nothing of gay mannequins and our check out booths are right by the door. The aisles are wide, it's bright and clean. It does seem that their strategy has been bumbling, which I don't understand because Johnson did a great job for Target. Maybe they should give momorebarry a chance! I've been meaning to go for there for several items and I'm still going to. Sears sucks since K-Mart bought it, Kohls stuff is cheaply made, The other stors at the mall are ridiculously expensive. Penny's works for me, I hope they can get it back on track.

[george53wu]

yea Im going back to Belk...................

[george53wu]

yea, they are probably like Sears making their female employees carry around see through purses verifying that they dont even trust their own human resources. How can they provide any customer service when they dont even trust their own workers??????????

[stevenjdub]

sorry George...although I agree with your concepts here I will say from experience that the majority of theft that happens in a retail store is not from outside...it is usually from the folks that sell it on the sales floor...its sad but a true fact...these are only ways that a store has tried to protect themselves from those losses...granted thta retaiul is a very low paid profession but it stil is a high theft profession as well...not all or even most but a big chunk of all store theft.

[tabcat79]

I agree with 699. The last time I was at JC Penney's, I had to run all over the store trying to find a sales associate who could ring up my purchase. I've set things down and walked out more than once. The registers at my JC Penney's are hidden in strange places. They are not easily located.

[nomorebarry]

He says that JCP just learned that consumers don't shop on a monthly basis? What an idiot especially if he thinks investors will believe that - ANYONE in the retail industry KNOWS that - even Apple customers don;t do that - whaqt a buffoon running this once fine retailer into the ground - he needs to take his $50MM and go ASAP before the damage he has done is irreversible - ALL retialers know there are seasons for customers. Please email me and I will turn the company around for A MERE $250k a year - give me one year and if it's not back on track I would gladly leave.

[1234567gary]

Here's an idea, I used to shop at Penny's until they decided that it was important to display their merchandise using homosexual models (to promote whatever it is they are trying to promote... "gayness" I suppose). I'll confess I did not know that clothing was homosexual by style but since I have now been educated by their marketing that their products are meant to appeal to that segment, and since I as a heterosexual do not want to buy homosexual clothing, I saw no reason to continue my business with them. Truth be known I thought the idea not to have sales and present all the clothes at a standard good price was a great idea, I could not see any reason to then shop there where they have in effect announced their products are for homosexuals. Pity! Hmm, I guess I am the only one in the world who thought this way. Question is, why didn't the homosexual oommunity step up and buy, buy, buy? Surely it was a great business and marketing decision... why didn't it work?

Let the name calling begin... please, I need a good laugh.

[pwgrant]

this post makes me laugh. Thanks! You are not alone. There;s a great Dana Carvey bit along these lines.

[mmill206]

Homosexual clothing? Really? Where were you 'educated' at about these so called homosexual clothes? I suppose if a gay person models in a car, that certain car is for "gays"? Or if a gay person is in a toothpaste commercial then that toothpaste is only for gay people?

I am also hetrosexual and totally disagree with your logic here.

PS. I would love to call you a name, but its not nice to call people a bigot!