J.C. Penney revives "clearance" sales

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(AP) NEW YORK - J.C. Penney (JCP) is changing its pricing - again.

Just six months after the mid-priced department store chain got rid of the hundreds of sales it offered each year in favor of everyday lower pricing, it is reversing courses.

Penney on Feb. 1 began using a three-tier pricing approach that called for lower everyday prices, monthlong sales and period sales events. Now, starting Aug. 1, Penney will eliminate one of the tiers and bring back the word "clearance." The company also plans to tweak its advertising to better communicate the pricing to customers.

The moves come at a time when shoppers - and investors - were growing increasingly confused with Penney's pricing strategy, which was spearheaded by new CEO Ron Johnson when he took the helm in November. In May, Penney's stock plunged nearly 20 percent in its biggest decline in four decades after it posted a bigger-than-expected quarterly loss and a 20 percent drop in revenue on poor reception from shoppers for its pricing strategy.

The change also calls in to question just how patient Main Street and Wall Street will be with Johnson, a long-time retail executive who was brought in with high hopes that he'd transform Penney with the same magic that he used to make Apple's stores and Target's cheap chic strategy successful in his previous roles at those companies. The pricing strategy is a tough sale to shoppers who have come to expect deep blockbuster deals and investors who are looking for Penney to turnaround its business quickly.

Johnson, who asked investors to be patient during a meeting with them in May, said he's confident that the pricing strategy will work. Johnson has acknowledged that Penney has a long way to go to convince shoppers not to wait for sales, and said that Penney's first-quarter sales drop is "the price we're paying to get integrity back."

"We thought simplifying 590 unique sale events into three types of pricing would be easier, but it turns out ... customers and others found the pricing a little confusing," he said. "Now we're going from 590 to 3 to 1: The first price is the right price."

Under the new system, Penney is keeping "Every Day" low prices that are consistently 40 percent lower than regular prices before the company eliminated sales. It also will keep period clearance sales, but will change their name from "Best Price" to "Clearance." And it will get rid of "Month Long" deals.

To go along with the new pricing, the company will add new advertising. That will include inserts in newspapers every Friday during the back-to-school season will talk about specific products like jeans. A TV ad will tout free haircuts the stores will offer students during the back-to-school season.

That's in contrast to the ads that are part of Penny introduced previously to introduce its new pricing plan. The "fair and square" brand campaign featured TV ads that featured dogs and kids and bright colors - but little explanation of the Penney's pricing.

"In some ways marketing during the first six months entertained versus educated," Johnson said. Now, "the most important thing is to educate consumers on the price changes and make sure the core customer understands J.C. Penny still has products they love, at exceptional value, every day."

Penney is hoping the new pricing and advertising will help stem growing concern about whether the pricing strategy can help the retailer turn around its business.

The first sign that Penney's new pricing plan wasn't resonating with customers came last week when Macy's CFO Karen Hoguet told analysts that sales were rising at her company's stores that share malls with Penney stores.

Then, J.C. Penney Co. reported that it lost $163 million, or 75 cents a share, in the three months ended April 28, compared with a profit of $64 million, or 28 cents a share, a year earlier. Revenue dropped 20 percent to $3.15 billion for the quarter as customer traffic slipped 10 percent. Meanwhile, revenue at stores open at least a year - a comparison used to measure a retailer's health - fell 18.9 percent. That's much steeper than the 11.4 percent drop Wall Street was expecting.

Investors, who had sent Penney shares soaring 24 percent to about $43 after Johnson announced the pricing plan in late January, have been down about 37 percent since the beginning of the year. On Thursday, shares slipped 49 cents, or 2.2 percent, to $21.51 in midday trading. Then, earlier this month, Standard & Poor's Ratings Services lowered the retailer's credit rating further into junk status, saying changes have yet to take hold.

[TKTuttle]

"In some ways marketing during the first six months entertained versus educated," Johnson said. Now, "the most important thing is to educate consumers on the price changes and make sure the core customer understands J.C. Penny still has products they love, at exceptional value, every day."

So who misspelled the name of the company as quoted, the reporter or the CEO? That's either poor reporting or the head of the company can't even spell his own place of employment.

[cattiej]

The "clearance " that Penny's should make is to fire Ron Johnson immediately. I hate it that they closed all the catalog sales..I have used the Penny's catalog for over 60 years. I shopped J.C. Penny's for my husband clothes, our four sons clothes and my clothes for years. I used to love the linen department and found quality merchandise...NO MORE., I bought drapes for one bedroom where every drape was a differnet length (i.e. one of two inches longer or shorter.). The bedspread that I bought to match smelled of dye so strong that I had to take it back. It was made in India. The drapes in China. The shoe department has mostly shoes made in China or Vietnam. The mens sweaters are all and I mean all, of poor quality. I don't want poor quality, I want good quality merchandise that was Made in America. I am asking all Americans to stop buying merchandise made in other countries...and buy on American made products. Did you know that 90% of our Rx meds are made in India, Mexico, Canada and other countries? As your pharamist where your Meds were Manufactured...All Colgate toothpaste is made in Mexico. If you go to Pennys' check where the product was made...you won't find anything made in America...Shame on Penny's...If old J.C. was alive, he would probably close the doors himself. We don't go into Penny's anymore. We now shop a Goodwills, Salvation Army and Thrift shores where we can find gently used Made in America merchandise. You can close the door on all the Penny's as far as our family is concerned...The concern we have is for the employee's who for years have made minimum wage and have lost their jobs at Penny's....So saying the above, show Ron Johnson the Exit sign at Penny's and tell him he is no longer needed..He can get in the unemloyment line with the rest of the folks who used to work for Penny's....sorry, I forgot, Ron's another millionaire who probably has plenty of money but probably doesn't pay if fair share of taxes..I think Penny's will probably be out of business by 2013.

[Mac-011]

JCP is finished. Another victim of the gay abomination. Ellen is a failure as a spokesperson, and embracing the gay lifestyle bit them in the behind, no pun intended.

[fiberglass3]

For starters they need to make it easier to get cashed out. Several years ago there was a cashier at each department. Today you get in a long line that reminds me of Disney Land. Many of the cash registeres have no attendant.

[baby-boomer-54]

Oh please Mr Johnson....please do not make the American people look so foolish that we are 'confused' about your new stragedy of pricing. You were confused in thinking that the American people would accept and still buy your product after using advertising that promoted bullying in children and using a lesbian with sick bedroom jokes in the advertisments....that's why YOU made a long standing traditional family company lose more money that it ever has....not the consumer.

[hypnotoad72]

I wouldn't buy their merchandise either... and as a customer, I know what I want and I would go to a store for service. Not empty gimmicks.

[Nearwater]

I have shopped at JC Penney for years but when the new "everyday low pricing" came out it became clear that the "everyday low pricing" was higher then what I would pay with the item on sale. JC Penney should take a hard look at what Khol's is doing and how they market to their customers.

[whozzzzure]

Their "reconfiguring" their best price stuff did not confuse me. There was a 10 to 20 percent mark up from clearance on the vast majority of stuff. I stopped visiting the pages, as I would guess many shopper did who were used to the old clearance method, where the prices were lower. You might be able to fool the public, but you cannot fool a woman who shops JCP often and compares.

[mjb89]

whozzzure, you are so right. Don't try to pull the wool over my eyes. But you can know that the store is in trouble when I go in to shop and come out emptyhanded. Just doesn't happen to me in JCPenney's.

[test43]

The government should run/control JcPenny. For sure we would get free clothes as part of the government hand-out program.

[dmhsep]

test43 Good one, I love it.

[hypnotoad72]

Well, they give handouts to corporations that offshore jobs (which means we have fewer opportunities to become and remain self-reliant and that also means a revenue problem is created since there are fewer jobs to tax... )

[Jaylah54200]

They never did change anything other than their marketing ploy.

Even after they went to their "everyday pricing" idea, they still had "sales", and advertised them on television, every time you turned around.

Note to Penney's shoppers: Nothing changed before, and this doesn't change anything that wasn't changed before.

[credibility2]

JC Penney's mistake with their newer approach was that they made the assumption that their customer was intelligent enough to understand the concept and that always having lower prices was the better advantage for them since they were always available and not tied to a gimmicky sale. I'm sure Penney's will now have to increase the base pricing of their inventories before marking the prices down for the clearance sales just to make it appear to their dense customer that the clearance sale is indeed a better buy for them than the previously non-sale priced item.

[nazcap]

I agree; I liked their reboot, and I'm sorry it didn't work out. It was a more honest way to shop, but just not what Americans were accustomed to doing.

[Dreadnut]

"always having lower prices was the better"

That only makes sense if your selling milk, or any other commodity that meets the "must-have + short shelf life" criteria.