J.C. Penney Co. (JCP) Chief Executive Officer Ron Johnson, reiterating that his turnaround of the department store chain will take four years, said he’s sticking with his strategy for “everyday low prices.”
“We do not believe in marking up goods beyond a fair profit, we will not mark things off 10, 15, 20 percent off, we do not do that type of business,” Johnson said today at the Fortune Brainstorm Tech conference in Aspen, Colorado. He cited the effectiveness of the strategy for Wal-Mart Stores Inc. and Starbucks Corp. (SBUX) and for goods such as gasoline.
Johnson, the former retailing chief of Apple Inc. (AAPL), has worked to transform J.C. Penney stores into collections of branded shops and instituted a three-tiered pricing system to wean customers off discounts. The strategy has met with resistance from shoppers who crave coupons or are unfamiliar with the new look, contributing to a 20 percent decline in first-quarter sales.
J.C. Penney, based in Plano, Texas, rose 2.4 percent to $19.71 at the close in New York. The shares have declined 44 percent this year.
Johnson today recalled that Mickey Drexler, the CEO of J. Crew Group Inc., who engineered a turnaround at Gap Inc. earlier in his career, advised him to ignore criticism and to “put your head down and do what you know how to do.”
“It’s been interesting for me, watching all these analysts, they think it’s going to change overnight,” Johnson said. “We all forget these things but transformation takes time, it’s not a sprint.”
The chain’s plans to open more stores within its stores hit a snag last week, when a New York state Supreme Court judge granted Macy’s Inc. (M) a preliminary injunction that will block Martha Stewart Living Omnimedia Inc. (MSO) from working toward making, marketing and selling Martha Stewart-branded products in J.C. Penney stores.
J.C. Penney’s second-quarter sales trends may have softened from the first quarter because of an “an inconsistent marketing message,” Deborah Weinswig, an analyst at Citigroup Inc. in New York, said in a note to investors yesterday. While Weinswig retained her “buy” rating on the stock, she removed J.C. Penney from the bank’s top picks list, saying that near-term challenges have been greater than expected.
Johnson told the audience today that they’ll be hearing “really soon” about a more simplified pricing strategy.
“Our pricing’s been kind of confusing, our marketing overreached, so we’re going to bring that back,” said Johnson, who has been CEO since Nov. 1. “We’ll really honor the everyday price in a different way.”
J.C. Penney, with more than 1,000 locations and $17.3 billion in sales last year, is expected to report second-quarter earnings on Aug. 8.
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