J.C. Penney Capitulates
The capitulation is complete. Just one year and lots of cash burn later, J.C. Penney (JCP) CEO Ron Johnson admits "he made some big mistakes last year." The biggest mistake was yanking sales away from addicted bargain hunters without bothering to test the reaction. Johnson is a fan of truth on price tags in the form of everyday low pricing (EDLP). The problem is that the consumer does not perceive truth as a reason to buy. Now having posted four of the worst consecutive quarters of same-store sales declines in the history of retail, JCP is bringing back -- you guessed it! -- sales. But Johnson would prefer the word gift in some cases (that is, coupons are really gifts).
While we saw the return of the dirty word (sale) as inevitable, the question is: Is it too late? Comps this quarter hit a yearly low of 31.7% while online sales plunged 34%. Conversion rates (-10%) and traffic (-17%) are not moving in the right direction. The bottom line is that JCP customers have headed for the exit and it might take a lot of begging to get them back. With gross margins already down more than 600 basis points (bps) this quarter, driving traffic back in the stores will not be inexpensive. Translation: big sales, even lower gross margins....176 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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