JCPenney Would Be Doing Great If the Stores Were Less Like JCPenney

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In a meeting with analysts this week, JCPenney CEO Ron Johnson—the retail superstar famous for making the Apple Store a monster success—proudly showed off a model of the JCPenney store of the future, featuring an assortment of branded “stores within the store” focused on products from Levi’s, IZOD, and others. Mini shops like these are already in some JCPenney stores, and they’re outselling the rest of the store’s merchandise by 20%. What seems to be holding JCPenney back from posting terrific sales figures overall, then, is that the stores still largely resemble the JCPenney your grandmother knew.

When Ron Johnson announced a major overhaul of JCPenney’s look, pricing, and products earlier this year, it was universally declared a bold move. The elimination of coupons and sharply decreased use of sales and markdowns were deemed especially risky. Dismal sales figures in 2012 seem to indicate that many old-time JCP shoppers have felt alienated and confused, and have turned elsewhere to hunt for bargains. Same-store sales dropped by more than 20% in the second quarter of 2012.

If there is a glimmer of hope for JCPenney, it’s that one major part of the retailer’s dramatic makeover—the “Shops” store within a store concept—appears to be quite a hit with shoppers. As Reuters, the Dallas Morning News, and others have reported, the Shops that exist thus far are outperforming their surrounding stores with 20% higher sales.

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The plan, according to Johnson, is to have 100 of these different specialty boutique stores within larger JCPenney locations by 2015. Naturally enough for the Apple retail veteran, Johnson compared his vision for JCPenney with its new Shops—selling everything from Levi’s to Liz Claiborne, candy to coffee—to an iPhone. “All those boutiques are the apps,” he said. “What J.C. Penny is creating is a new interface.” As for the old “interface,” the one that is still found at malls around the country, it now appears to be about as cool and useful as a flip-open “dumb” cell phone.

“We’re not here to improve, we’re here to transform,” Johnson told analysts, according to the Dallas Business Journal. And the CEO appears to truly mean it.

The chain aims to “ditch the ‘old lady’ store perception,” in the words of the Dallas Business Journal, and Johnson said, “We’ve got to get a younger customer.” To do so, JCPenney has already gotten rid of its old pricing systems. As a result, it’s also gotten rid of many of its old customers. With the rollout of the Shops, it has started to replace its old merchandise, too. Heck, JCPenney even has plans to get rid of checkout counters.

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At some point, it might be worth asking whether all of this whole-hog “transformation” makes much sense and is worth the effort. In some ways, it might be easier to just launch an entirely fresh and new department store from scratch, rather than attempt to drag a 110-year-old brand into the future.

Even if such an epic transformation is possible, there’s a concern that, in light of continued lagging overall sales, JCPenney won’t have the time to wait for Johnson’s vision to become a reality. Some analysts are skeptical that the transformation can occur within a reasonable timeframe, per Bloomberg News:

“I like the story, but you are talking 2014 before the concept is in place enough for it to really figure,” Noel Hebert, chief investment officer of Bethlehem, Pennsylvania- based Concannon Wealth Management LLC, said today in an e-mail. “Right now, your store-within-a-store brands/boutiques are doing well, but are not large enough to move the needle.”

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JCPenney’s stock price spiked briefly on Wednesday after Johnson’s guided tour of the new-new JCPenney, but shares then tanked on Thursday, dipping 10%. As the Wall Street Journal explained, the feeling seems to be that JCPenney of today is still too much like the JCPenney of old, and the much-hyped transformation just isn’t occurring quickly enough:

“J.C. Penney is taking steps in the right direction, but the road to recovery is still a few years away,” Deutsche Bank said in a note to clients. “As for the stock, after a massive move in the past five weeks, we think some of the air needs to come out of the proverbial bubble as reality sets in.”

Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

6 comments
go_ask_alice
go_ask_alice

Gotta tell you, Michael Wellman, that you are spending more money not shopping at jcpenney. I will give you an example. A typical bra sale was buy one get the second half off. That is also the sale that ALL of the other department stores run. At both Kohls and Belk, the price on the tag was $36. That makes two for $54 or $27 each. The same bra at JCPenney is $22.00. As for clothing, the quality is going up, up, up! The price is the same as it was last year on sale. At JCP, everything was ALWAYS on sale. They came in with an inflated price on the tag and discounted off of that price. Now, the price is the real price. If you wait and risk running out of exactly what you want, you might even score it on clearance

go_ask_alice
go_ask_alice

Gotta tell you, Michael Wellman, that you are spending more money not shopping at jcpenney.  I will give you an example.  A typical bra sale was buy one get the second half off.  That is also the sale that ALL of the other department stores run.  At both Kohls and Belk, the price on the tag was $36.  That makes two for $54 or $27 each.  The same bra at JCPenney is $22.00.  As for clothing, the quality is going up, up, up! The price is the same as it was last year on sale.  At JCP, everything was ALWAYS on sale.  They came in with an inflated price on the tag and discounted off of that price.  Now, the price is the real price.  If you wait and risk running out of exactly what you want, you might even score it on clearance.

Hachachacha
Hachachacha

I am suspect of the real meaning of that "up 20%" in sales figure.   Of course the stores within a store will do 20% better sales than the other parts of the store, when they have purposely let those other sections of the store go to pot with crap on the racks.  You have to look at that figure in context.   They have not put out any decent merchandise in those other parts of the store in a long time, so it wouldn't be difficult to do 20% better sales than they do.  The sales are up 20% from what, nothing? When they have already driven most of their customers away? How promising is THAT? What an artificial figure, designed to make it look like they're succeeding.  Are they doing better sales than they were say a year ago before they started driving away customers with no sales and coupons?  I'd like to see that figure.  Oh, but I'm sure they won't tell us that.  What a load of baloney!  Ron Johnson just wants his shareholders to think they're a success so they don't dismiss him.

Michael Wellman
Michael Wellman

JC Penney would be doing great if they went back to the standard department store model of holding regular sales on their in-stock items and making their bountious profit on the non-sale items that people buy when they come in for said sales.  The "We don't do sales" model is the only reason that I do not shop at JC Penney, the only reason my Mom does not shop at JC Penney, etc.  When I used to shop there, probably 20-30% of what I bought were sale items, but the rest were normal priced.  Now I go get those items at Belk... and this is from a person that did 100% of their clothes shopping at JC Penney for over a decade.