J.C. Penney (JCP) president Michael FrancisJ.C. Penney (JCP) president Michael Francis, the junior partner in the executive duo leading the chain's radical new "fair and square" pricing strategy -- which eliminated most sales -- resigned Monday, after just eight months on the job.

Francis' sudden departure calls into question the retailer's bold move to cut 590 annual sale events and eliminate coupons, a strategy that has largely been applauded by retail analysts, but has left many shoppers cold.

Despite Francis' exit, J.C. Penney says it's staying the course on its turnaround strategy. "His departure does not signify a change to J.C. Penney's long-term transformation plans," Daphne Avila, media relations director for the department store, tells DailyFinance.

"We remain focused on our vision to becoming America's favorite store through great product and exciting new brands, a dynamic shops environment and an ongoing commitment to treating customers Fair and Square," she says

But Avila declined comment on the reasons for Francis premature exit.
Update (June 20, 10:20 a.m.): In an interview published in Women's Wear Daily on Wednesday, J.C. Penney CEO Ron Johnson said Francis left the chain because marketing -- which the former president was charged with -- wasn't working. In turn, "My job as CEO is to really take responsibility for everything. I felt compelled to dive in and help with the new strategy," Johnson told WWD. "Michael and I both concluded we didn't need two hands on the same steering wheel. The marketing I largely left to him. The fact that it hasn't resonated [meant] I had to get involved."

Johnson is now overseeing marketing and merchandising himself.

Despite the retailer's failure to market the fair and square pricing push, Johnson reiterated his faith in the strategy. "We are huge believers that we are on track, and that ultimately we will carve out a winning position," he said.

Marketing Missteps


Ron Johnson, who took the reins as Penney's CEO in November, plucked Francis from Target (TGT), where he was executive vice president and chief marketing officer. Johnson, also a Target alumni, joined Penney from Apple (AAPL), where he led its highly successful retail stores.

At J.C. Penney, Francis helped devise the marketing plan for the fair and square pricing strategy, which debuted in February. That's when Penney permanently marked down all of its merchandise by at least 40% to new, everyday low prices. It also limited sales to "monthly value" discounts on select items, and "best price" sales held regularly twice a month.

The retailer has been backpedaling on parts of the strategy ever since.

In May, Johnson conceded that Penney's first quarter $55 million net loss and 18.9% comp-store sales decline in part reflected Penney's failure to effectively communicate the new pricing strategy to shoppers.

J.C. Penney (JCP) president Michael Francis

On June 5 came another concession: Johnson said it was a mistake to drop the "sale" word from its vocabulary. "We're moving away from the word 'month-long value' because no one really understood that, to calling it what we intended to do, a sale," he told Reuters, at a Piper Jaffray conference in New York.

But Johnson has stressed that he expects the strategy will still pay off in the long term.


Butting Heads?

When it comes to "fair and square pricing", Penney's has a marketing problem, Paul Swinand, equity analyst with Morningstar, tells DailyFinance. Francis' departure likely reflects him butting heads with Johnson "over tactics and implementation" of the program. "Do you use the word sale? Call it 'fair and square'? Everyday low price?"

While weaning shoppers off temporary bargains won't be easy, Penney's everyday low price strategy is a sound one, and already works well for retailers ranging from Walmart (WMT) and Costco (COST) to H&M, Swinand says.

Although Penney's first quarter results were poor, "they were actually selling an increased amount of stuff at regular price," which is evidence that shoppers are warming up to the change, he says.

Howard Davidowitz, chairman of Davidowitz & Associations, a national retail consulting and investment banking firm, couldn't disagree more. Francis' departure "marks another nail in the coffin" for J.C. Penney, he says.

"What it definitely suggests is that the strategy will not work," says Davidowitz. "[Johnson] should have [first] tested it in 100 stores." That's what you do "when you want to revolutionize a company."

Countering that notion, Swinand contends that historically, revolutionary marketing ideas "don't test well" -- but that doesn't mean they won't eventually succeed, he says.

Such debates over testing aside, in its transition, Davidowitz notes that Penney has ceded shoppers to Macy's (M) and The Gap (GPS) along the way, CEOs from both chains have said.

But the real issue is that Penney's new strategy is fundamentally flawed, he says. "The American consumer has lost 10% of their income in the last four years, there are 50 million people on food stamps, the customer's net worth is down by 40%. Penney's should be driving up promotions because the American consumer is poor," he says. "It's all wrong."






Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Add a Comment

*0 / 3000 Character Maximum

114 Comments

Filter by:
agaynor68

JC PENNEY'S IS ON IT WAY OUT..................... IT TO LATE TO FIX IT!!!!!

August 14 2012 at 2:01 PM Report abuse rate up rate down Reply
doctora999

NO, RON JOHNSON..........your EGO has supercede itself. It doesn't matter if you or Francis handled your piss poor marketing approach. DON'T INSULT US & imply that we (consumers) don't understand the term 'monthly value'. That's crap we prefer: QUALITY, COUPONS, THE OUTLET (on line) SALES, SALES & MORE SALES.
YOU ARE INSULTING! We don't care about your new catalogs, and your NEW online unfriendly customer format TECHNOLOY....which SUCKS!!!. Why the hell did you change it?
I'm a Platinum card holder. JC PENNEY'S use to be my primary store for purchasing all my gifts and personal needs. My monthly bill was always over 300.00 a month.......NO MORE! I haven't purchased in the past 4 - 5 months & I won't be purchasing.
You need to stop trying to fix something that isn't 'BROKE'!!!! I hope you & your management team can get pass your EGOS and listen to your customers. The numbers DON'T LIE
UNSATISIFIED CUSTOMER!!!!!

August 05 2012 at 1:55 AM Report abuse rate up rate down Reply
mjsampley

I LOVED J C Penneys and shoped there all the time. Now whoever is making all these changes are ruining it! The new catalogs are a waste! No info at all and do no good. Now you want to take away all the other things that are good at J C Penneys. Most of us that shop there do not like all this new fangled technology and will just go somewhere else instead of using it!

July 23 2012 at 4:21 PM Report abuse rate up rate down Reply
hallrich34

JCP, UNDER CFO JOHNSON, IS GOING THE WAY OF THE OLD BUGGY WHIP!

July 23 2012 at 3:46 PM Report abuse rate up rate down Reply
donut999

Kind of surprised someone in that position just did not "get" the average American consumer. Shopping is war for most of the people that purchase most of the goods. Their story, on their most recent acquistion typically runs like this--Wanda, I got this new pair of shoes for $26. They were marked $101, but I waited until the Armenian Armistice Day Sell a Thon, went to the store at 10:01 am and with the 50% off coupon plus an additional $25 off for wearing my purple beret, they were only $26. These folks do not win a lot of other wars besides the shopping one. It would we way too boring to just tell Wanda--I picked these up for $26 at JCP.

June 21 2012 at 10:37 AM Report abuse +1 rate up rate down Reply
1 reply to donut999's comment
italicsmyn

Don't be surprized. Too many CEOs are classic "so smart they're stupid". They don't know people because to them we're just unwashed masses. For instance, the big shot who kicked out Jerry Lewis as the MS spokesman. He didn't even let him go out with style and grace after all those years of blood sweat and tears for the cause. And he was too ignorant to realize he made a stupid blunder until he saw the bottom line of donations.

June 21 2012 at 2:30 PM Report abuse +1 rate up rate down Reply
Karen

What they don't talk about is the stores that are empty. The long-time employees forced into taking a "package" retirement. The loss of your commission sales for those in the salon, jewelery, and other areas. I work there .n I see what is happening, it's awful to see a thriving store go down on less than six months. We're made to say how wonderful it is when in reality we know the difference.m I feel like big brother is watching every move I make and every word out of my mouth. I used to love this company, now I loathe what it has become in such a short period.

June 20 2012 at 8:39 PM Report abuse +1 rate up rate down Reply
RPJACKMAN

Johnson is the real problem. In addition to makeover doomed for failure his insertion of a radical "social" cultural war agenda has John Cash rolling over in his grave. In the June catalog ad he has placed two homosexuals pictured on the floor playing with their "children" for "Fathers Day" Well, THEY didn't father either child. JCP is probably our oldest piece of plastic having obtained it and using it 50+ years ago. We are now at a point in our lives where we can afford anything we want. JCP will no longer see our $$$$$. Their need to make as much money is not an "inclusive" factor. It is a GREED factor to make money by ANY means possible.

Good Bye Old JCP - You've been replaced by a moraless faction

June 20 2012 at 6:19 PM Report abuse +1 rate up rate down Reply
bonniecd

I wish that more could look behind the scenes of JCP to see the 500+ senior employees at the home office terminated by Johnson to pad the way for his debacle, many of whom had more than 20 years of loyal service to the company. Is this the way Mr. Penney would have like things to turn out? But Johnson's Golden Parachute will make him even more wealth regardless. Good for him, sad for the 500+ looking for jobs in their senior years after dedicating themselves to the company.

June 20 2012 at 2:07 PM Report abuse +1 rate up rate down Reply
Kathy

Someone commented about the logo. I thought it was junk mail....glad my husband opened it....it was my bill. Like their merchandise looks cheap as the logo looks like a block stamp. No eye catcher.

June 20 2012 at 2:02 PM Report abuse rate up rate down Reply
Kathy

As soon as I can get JCP paid off, NO MORE SHOPPING THERE. I bought close to $300.00 worth of the Home Collection classic towels, bath clothes, and hand towels. What made it really chap me is 1/2 of the purchase was for my parents at Christmas. They have all come unraveled. With the first one, I should have taken all of them back. Parents live 100 miles from me and also I depise having to return things. It's quite a distance to get to the store. I've learned my lesson. CHEAP STUFF AND EQUAL TO A DOLLAR STORE NOW!!!

June 20 2012 at 1:54 PM Report abuse +1 rate up rate down Reply