Ron Johnson’s reign as Chief Executive Officer of retail giant JC Penney (NYSE: JCP) has been rife with criticism. Same store sales have plummeted, the stock has faltered, and many observers have openly questioned the viability of the once esteemed retail firm. The majority of criticism pointed at the firm has been in regards to their deviation from the historical retail pricing model which offered frequent sales to get customers in the store. Although the simpler pricing model was aimed at increasing customer retention, it did quite the opposite in practice.
Finally, the firm seems to have learned from this mistake, and has announced today that they will return to a pricing model invoking sales as a tool to drive customer behavior. The result? JC Penney’s stock price soared to its highest level in a year, and was the biggest gainer of the day. The shares rose 9.3 percent to $21.01 at the close in New York, the biggest gain since Jan. 26, 2012. The stock declined 44 percent last year, compared with a 13 percent gain for the Standard & Poor’s 500 Index. Investors are placing record bets on a decline in J.C. Penney’s stock. Almost 25 percent of the company’s shares outstanding were sold short this week.
J.C. Penney will hold sales on popular items tied to “key events and holidays” such as Valentine’s Day, Easter and Mother’s Day, Kate Coultas, a company spokeswoman, said in an e-mail. There will be fewer than 100 of the events, compared with almost 600 unique promotions in 2011, she said. The company has been sending e-mails to customers alerting them to clearance merchandise and has worked to win back shoppers through offers such as a $10 in-store coupon, 30 percent discounts off clearance items, free children’s haircuts and free family portraits. “We continue to believe in the importance of great everyday value,” Coultas said in the e-mail. “It has been and will continue to be the cornerstone of our pricing strategy. Every time a customer walks into our store, they can take advantage of low everyday prices.”
The key question now becomes, is this reversal of plans enough to bring customers back to JC Penney, or have customers already found new outlets to replace them while the firm toyed with its new pricing scheme over the past year. The market is responding positively to the news, if customers do as well, Johnson may finally be able to restore some of the glory that has been lacking at the firm in recent years.
