JC Penney Case Study
March 28, 2013
JC Penney is one of only a handful of one hundred year old plus companies in the United States. Founded in 1902 by James Cash Penney, the company has grown into a major retailer, with 1,104 stores and approximately 116,000 employees as of February 2013. The company sells merchandise and services through its department stores and website, jcp.com. Their product mix includes clothing and shoes, accessories, jewelry, home furnishings and beauty products. In addition, they provide services such as styling salons and portrait studios. James Cash Penney founded the company on the Golden Rule; treat others the way you want to be treated. That strategy worked well for them over the years as indicated by several financial milestones, including their first $1 billion sales year in 1951, their first $1 billion catalog sales year in 1979, and their first $1 billion online sales year in 2005. JC Penney weathered the storm through many major crises, including World Wars I and II and the Great Depression. They benefited from the enormous population growth and spending power of the American middle class, their core customers. Over the years the company expanded into the drug store, insurance and banking business. Recently, though, JC Penney has suffered. The recent great recession hit them rather hard and their sales and profits suffered. In order to regain market share and redefine the company the Board of Directors brought aboard Ron Johnson, head of Apple’s retail stores and former Target executive. Johnson was tasked with rebranding the 110 year old retailer and making it more competitive against their rivals such as Kohl’s, Macy’s, and Target. Johnson’s strategies were focused on an ambitious goal; to make JC Penney America’s favorite store. Business strategy
In January 2012 Johnson introduced a bold new business plan to transform and reinvent JC Penney. This four-year plan called for new pricing strategies, promotions, store renovations and an expansion of their stores-within-a-store concept, all with the hopes of attracting new customers and to become more competitive. Johnson envisioned wider aisles, less cluttered and brighter sections of stores dedicated solely for individual brands, and an overall more inviting shopping experience. The grand strategy included remodeling all 1,100 stores, eliminating coupons and huge markups, focusing on low everyday prices (not to be confused with Walmart’s everyday low prices) and introducing up to 100 branded stores-within-a-store, essentially converting the company from a discount retailer to a specialty retailer.
Johnson planned to return the company to its roots by following the Golden Rule; treat others the way you want to be treated. In the company’s 2011 annual report to shareholders Johnson described this strategy as “Fair and Square”. He labeled 2011 as their year of transition and 2012 as their year of transformation. Johnson wanted to bring back JC Penney “to the golden age of department stores, when retailers offered truly special experiences that customers loved.” His four-year plan was expected to culminate by 2015, when shopping at JC Penney was to “be unlike and retail experience that exists today.” So far the transformation has been dismal, causing dramatic reductions in the company’s sales and profits, far below expectations of management and investors. Since Johnson took over, their stock price has fallen nearly 52%, from $32.04 on November 1, 2011 to $15.41 as of March 25, 2013. Management now believes their recovery will take longer than expected and they will most likely have to adjust their strategies depending on sales performance and customer’s reactions. The company seems to be struggling to find their identity and is having a difficult time differentiating themselves from their competitors. They have not yet appealed to their traditional, core customers or attracted the new...
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