J.C. Penney Has Another Train Wreck of a Quarter

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Stop us if you've heard this one before: J.C. Penney (JCP) had another dismal quarter, but Ron Johnson is optimistic.

Same-store sales for the beleaguered retailer fell 31.7% in the fourth quarter of 2012, even worse than analyst projections of a 28% decline. Online sales struggled even more, with sales at jcpenney.com falling 34.4% versus the fourth quarter of 2011.

Total sales for the quarter were down 28% to $3.9 billion, despite the fact that the fourth quarter of 2012 was a week longer than in 2011. In all, the retailer posted a $985 million net loss for the year.

That's a loss of nearly a billion dollars in Ron Johnson's first full year at the helm after arriving from Apple (AAPL), and he acknowledged that sales for the year were below expectations. Still, Johnson was characteristically optimistic about the year to come.

JC Penney"Looking ahead, we are energized by our shop roll out plans for 2013 and the exciting work our teams are undertaking to transform the store," said Johnson in the earnings release. "Combining a new marketing campaign focused on style and value, incredible new brands and updated merchandise, with continued enhancements to the customer experience both in our stores and on jcp.com, we are working towards reconnecting with our core customer while attracting new customers to J.C. Penney."

Still, the retailer faces mounting challenges in the new year, not the least of which is convincing customers to come back after Johnson made an about-face by resuming sales last month. It's also embroiled in a public courtroom battle with Macy's over a deal with Martha Stewart, and it's burning through cash at a prodigious rate.

"It remains very hard to warm to J.C. Penney as a first half 2013 turnaround story given the cash being eaten alive by the turnaround," said Brian Sozzi of NBG Productions in a analyst note immediately following the release.

[UPDATE: In a live webcast earnings call, Johnson acknowledged that the "fair and square pricing" strategy was a major misstep.

"We also made some big mistakes and I take personal responsibility," he said. "I had a personal conviction to deliver everyday value with truth on the price tag."

That, he conceded, represented a misunderstanding of J.C. Penney's target customer.

"We learned [our customer] loves a sale, at times she loves a coupon, and she always wants a reference price," he said. "She needs to feel she added value to her family through savings she got from being a savvy shopper. So we've brought back sales and we've brought back coupons -- though we still call them 'gifts.'"

Finally, Johnson made what sounded like a reference to a New York Post report alleging that the retailer was pressuring vendors to make up suggested retail prices to make its own prices seem lower.

"We don't need to artificially mark up prices to create illusion of savings," he said.]

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.


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43 Comments

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coletred

Personally, I liked his changes (getting rid of sales, having one price). I also was delighted o find Liz Claiborne clothes after having to do without. So sorry JCP is going to change AGAIN.
Probably won't be going back...

April 08 2013 at 10:06 PM Report abuse rate up rate down Reply
chopsosteel27

JCP was the only store who gave my Mom a credit card when my Dad left her with four klids years ago. I'm a Grandmother now. My mom always shopped at JCP because of the respect and love they showed her, and I have given back to JCP by shoppping there to give them the respect they showed my Mom. But since they revamped the store? I don't shop there anymore. The clothes are low quality, which is sad. I've gotten by grandkids Christmas outfits from them every year. Not this year. Sears was the place to go for good quality and decent prices. Abd nicer designs!

March 01 2013 at 1:27 AM Report abuse rate up rate down Reply
strayoiler

Went to JCP and bought a $22 top. I used my 2 $10 "Rewards" and got the top for $2 plus tax. I brought it home and washed it and it wrinkled like a rag.There were 6 people in the store all trolling the $5.00 clearance racks. Why buy anything at the Fair and SQ price when in a week you can get it on clearance. Before the goofy changes I used to leave the store with arms loaded with family clothes and goods. There is NOTHING for me to buy there anymore and it seems I'm not alone. You want to turn it around. Bring back the quality goods,
the cash registers, the friendly helpful employees and do what JCP was known for, a wonderful place for family shopping. Now it's known as JCP [Johnson's Crappy Products] JCP [Johnson's
Capitol Plummets] JCP [Johnson's Creepy Patter]. I'm returning the shirt it's not worth $2 plus tax. Time for a change.

February 28 2013 at 11:44 PM Report abuse rate up rate down Reply
burnsengine

I don't pretend to have a great business mind... and I'm certainly no math whiz.
HOwever, my 99 year old grandmother (who can barely walk and is clinically blind) could outperform this clown!!!!
I mean, in this day and age, it's hard to compete in the retail industry with such a frazzled economy - but ... how is it this guy is single-handedly hosing this storied company with such impotence and so little resistance from his staff?
Gotta give it to Mr. Johnson for being the pinnacle of failure - that takes hard work - and still getting paid so handsomely for it. Although, if I were him, I would NOT put JCPenney on my resume!!!!

February 28 2013 at 8:01 PM Report abuse +1 rate up rate down Reply
deejhw

Mr. Johnson and JCP, WE DON'T LIKE WHAT YOU'VE DONE!! How low do your profits have to go before you realize that?

February 28 2013 at 3:54 PM Report abuse rate up rate down Reply
scheuerm

We cut our JC Penney card up after your political adds/support last year.

February 28 2013 at 3:54 PM Report abuse +1 rate up rate down Reply
deejhw

Mr. Johnson and JCP,

February 28 2013 at 3:54 PM Report abuse rate up rate down Reply
cnycitylady

i would have to say tht the qualityof the clothes there is supbpar even the so call brand names.....

February 28 2013 at 3:52 PM Report abuse +2 rate up rate down Reply
Sharon McHargue

Guess you got the picture

February 28 2013 at 3:32 PM Report abuse +1 rate up rate down Reply
Sharon McHargue

We went there after the remodel and my 12 year old daughter said, "Mom, we don't have to come back here ever again if you don't want to".

February 28 2013 at 3:31 PM Report abuse rate up rate down Reply