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Here's All The Craziness That Happened At JCPenney Since Ron Johnson Announced His Turnaround Plan
On January 25, 2012, JCPenney CEO Ron Johnson took a stage in front of a throng of anxious investors, analysts, and reporters.
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He announced his plan to turn things around at the struggling department store.
Johnson was JCPenney's white knight. He had joined the retailer in late 2011, leaving his high-profile job as the retail chief at Apple.
The brilliant mind behind the magnificent success of the Apple Store was supposed to be the century-old chain's savior.
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It's not nearly over yet — his plan called for a few years of transition. But now, it has been one year since Johnson gave that presentation.
JCPenney's stock is down 53 percent since then.
Johnson's plan focuses around a few key points:
- Change the pricing strategy to "every day low prices," which have three tiers: 1) regular prices, 2) month-long sales, and 3) the "best price"
- Revamp the entire layout of the store to become shops, supplanting the bazaar-like atmosphere
- Sign a ton of high-quality brands to fill those individually-branded shops
- Rebrand with a new logo to "jcp"
- Overhaul the website
On February 1, JCPenney begins its new pricing strategy of "every day low prices," aiming to wean customers off of coupons. Johnson touts it as "fair and square" — a simple, transparent way for customers to buy.
Meanwhile, Johnson runs into a controversy centered around JCPenney spokesperson and TV host Ellen DeGeneres — sparked by an anti-gay group because she's a lesbian — and handles it spectacularly.
A big survey from Citi's Deborah Weiswig concludes that customers like the new JCPenney and says that even though customers might take a while to get used to the new pricing, it'll pay off in the end.
Twenty six percent of Penney customers say the new model will lead them to shop more. Only 8 percent said it would make them shop less.
However, one third of customers were not aware of the change, according to the survey.
Part of Johnson's plan announced in January was to streamline operations, which required layoffs in both the corporate headquarters and in stores.
So, during April, JCPenney cuts 10 percent of its headquarters staff and thousands of middle managers across the country.
Analysts at UBS start to worry about JCPenney as sales continue to struggle and they set a deadline: "Judgment Day" would be during the second half of 2012.
JCPenney shares take a huge hit after a big miss in Q1 and the company comes under fire. Execs admit that they didn't realize how much people were into coupons.
For instance, Howard Davidowitz, a veteran retail banker and CEO of Davidowitz & Associates, says scathing comments about Johnson and JCPenney, calling the changes a "crackpot" idea that has done "incalculable" damage to the company.
Employees, worried about their jobs after a round of layoffs and the loss of commissioned pay, speak out against their employer and question the leadership of their CEO.
After customers didn't adopt the new pricing plan, Johnson admits that we was wrong and changes the pricing strategy, killing the "month-long value" system.
"Our marketing isn't doing the work. It needs to communicate pricing strategy" and bring in more traffic, he says. "We've got to get our pricing across."
Then, JCPenney president Michael Francis, part of the "Dream Team" Johnson brought in to turn the company around, quits. He had been in charge of marketing and merchandising and Johnson took over his responsibilities.
Analysts become concerned that Francis was just a "fall guy" and that at JCPenney it's "Ron's way or the highway."
JCPenney cuts another 350 jobs at the HQ, in addition to the 600 prior.
In the stores, workers start a massive remodeling project — the first big step in JCPenney's metamorphosis to a store full of individual shops. The first shops go live and really stand out in the stores.
Johnson also announces that he's working to eliminate the person standing at cash register and move to mobile checkout.
JCPenney's Q2 results come in and they're horrible.
Johnson details more of his physical store plans for analysts: a "street" in the middle of the store to help create the "mall within a mall" feeling, having workers go paperless, and more.
He also debuts a change of JCPenney's original advertising plan. It's totally geared to explaining JCPenney's pricing to consumers.
JCPenney's pricing strategy continues to fluctuate and the retailer starts touting more explicit discounts.
The numbers come in on JCPenney's new shops and they show that the concept is working. They sport 20 percent higher comps than the rest of the store.
Johnson says on CNBC that after Christmas, the worst will finally be over.
Coupons creep back into JCPenney, though the retailer calls it a "gift" to customers. Still, the customers seem confused, despite all the efforts to get them to understand the pricing strategy.
JCPenney's Q3 earnings miss big again and shares tank. Sales fell a whopping 27 percent — worse than analysts feared.
Analyst even start talking about a potential cash crisis for JCPenney.
At this point, sales over the first nine months of its fiscal year had fallen by $2.7 billion, which is nearly equal to the annual revenue of Saks.
Then, an important JCPenney sourcing exec, EVP Ken Mangone, leaves right as the holiday season begins.
Here's what he plans to get done in 2013:
- Have 40 percent of the total store space reinvented to the new JCPenney shops
- Update the assortment of goods, which Johnson said they still "haven't begun to update" yet.
- Add highly anticipated big brands like Joe Fresh, Martha Stewart and Carter's. Johnson said that the partners are the key to changing the perception of JCPenney, much like the iPod did for Apple
- Debut "The Street." It's a half-mile-long aisle for customers to hang out, with a "jcp bar" for pickups, cash checkouts and more services. Johnson called The Street the new "interface" for customers at JCPenney.
- "The Square" will make its first appearance as well — a seasonal area with some light food, beverages, and interactive events. It will change themes every two months.
Check Out JCPenney's New Concept Shops [PHOTOS] >
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