Former Apple Retail Chief Facing Criticism as JC Penney Stock Falls
After being JC Penney’s CEO for a little over six months on the job, former Apple senior vice president of retail Ron Johnson is already seeing criticism of the major overhaul he designed for the ailing department store chain as a recent earnings call revealed substantial losses. After leaving Apple in November 2011 to take charge of the department store, Johnson sought out to increase margins with the introduction of a new pricing model and unique retail ideas like the store-within-a-store, but customer response to the efforts fell flat according to Reuters
JC Penney reported higher than expected losses during its first quarter 2012 earnings call on Tuesday with a 20.1% sales drop year-to-year causing shares to fall 19.7%, the worst decline since the company began listing shares in 1929. The selloff erased $1.43 billion in market value and was the catalyst for a suspension of the stock’s quarterly dividend of 20 cents per share. JC Penney shares closed down $6.57 on Wednesday to end the day at $26.75, well below the $30.11 closing price seen the day before Johnson was named CEO last year.
As of right now, the company is in the middle of a multi-year plan to revive sales, though some analysts see the change as being one that will be ineffective. The new strategy (spearheaded by Johnson) involves the replacement of coupons and sales with “Every Day” low prices. On Tuesday, Johnson told analysts that he stands by the changes but admits that JC Penney hasn’t been successful in conveying the benefits of its new plans to their customers. When asked about the company’s advertising plan, Johnson said “It is not doing the hard work we need it to do right now.”
While working at Apple, Johnson was responsible for the creation of Apple retail stores and the retail experience, which are main components of the success Apple has seen, with the retail stores generating $4.4 billion in the last quarter alone. We’ll have to see if Johnson can turn JC Penney around to a path of success much like he did for Apple.