J.C. Penney Blames Ron Johnson's 'Failed' Strategy for Struggles

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jcpenney store earnings retail consumer goods sales
Mark Lennihan/AP
J.C. Penney is out today with another quarter of brutal sales figures, and it rather explicitly says that former CEO Ron Johnson is to blame.

For the sixth consecutive quarter, the company reported a loss. Penney said it lost $586 million, or $2.66 a share, for the three months ended Aug. 3, compared to a loss of $147 million, or 67 cents a share a year earlier.

Revenue came in at $2.66 billion, down from $3.02 billion in the same quarter last year. Same-store sales, meanwhile, were down 11.9 percent year-over-year. It missed earnings estimates with a loss of $2.66 per share. Analysts were expecting a loss of $1.07 a share on revenue of $2.77 billion.

Those are ugly numbers, but par for the course for J.C. Penney (JCP), whose struggles over the last two years have been well-documented. While growth had stagnated even before the arrival of Johnson, there's no doubt that the company's free-fall was largely owing to Johnson's extreme makeover of the century-old retail chain.

And the company did not hesitate to blame its ongoing problems on the former Apple (AAPL) executive, who left J.C. Penney four months ago.


Right off the bat, the earnings report says that its same-store sales were "negatively impacted by the company's failed prior merchandising and promotional strategies, which resulted in unusually high markdowns and clearance levels in the second quarter." It also points to "the lengthy renovation and disappointing re-merchandising" of its home department, another of Johnson's pet projects.

In an earnings call, new CEO Mike Ullman said that the company was working to get back to prior stock levels of its St. John's Bay house brand. That, too, was a reference to the prior regime's missteps: Johnson had done away with that brand, alienating much of the retailer's customer base. Ullman also alluded to "the errors of the past" and added that "we have work to do to rebuild customer trust and loyalty that was impacted by the mistakes of the past."

The finger-pointing is far from unjustified, and there's no doubt that the new regime has its hands full cleaning up prior management's messes. And from a financial perspective, it's fair to point out that sales figures are impacted by its need to compensate through heavy discounting.

Still, the blame game here feels unnecessary. This is, after all, a company that spent the last two weeks in the news for its ugly boardroom infighting with activist investor Bill Ackman. For Ullman to repeatedly harp on his predecessor's failures isn't going to change anyone's impression that the company's management is dysfunctional.

It's not all bad news for J.C. Penney. Despite the earnings miss, shares opened 8 percent higher Tuesday morning -- but gave back most of those gains -- largely owing to some positive trends: The company touted a 470-basis-point uptick in same-store sales over the first quarter of the year, and it also notes that it's seen strong sales during the back-to-school season. Perhaps we are indeed seeing the beginnings of a recovery for the struggling retailer -- or perhaps it simply speaks to the low expectations that it's set for itself over the last two years.

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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pawelrirl

;)

August 23 2013 at 7:17 AM Report abuse rate up rate down Reply
pawelrirl

oooooo

August 21 2013 at 7:22 AM Report abuse rate up rate down Reply
lllcln

like all these business,s that follow the idea of outscoursing jobs then buying cheap chinese products is a failed business policy.when you buy and make quality products and then sell those quality products in your stores then customers come back to buy your products.good business policy,s then you will see the bottom line go up and share holders will be happier.

August 21 2013 at 6:29 AM Report abuse rate up rate down Reply
jokenthom

I wish they would bring back their catalogs and more quality things. When I look around our home most of my linens,towels, throw rugs, husbands under clothes and mine too have been boughten through the catalog. Do not like the crowds and rush when shopping in the store. It is so relaxing to shop through the catalog.(not on the computer) The last time we were in one of your stores, it looked pretty tacky. We have not been back.

August 21 2013 at 12:42 AM Report abuse rate up rate down Reply
Andrea

I recently bought a dress at J.C.Penney that was on sale for $40.00 from $69.00. I peeled the sales tag off the original tag. The original tag said $40.00. How clever. I don't think I will return to Penneys

August 20 2013 at 10:17 PM Report abuse rate up rate down Reply
June

i said this once before but know one is listening bring back your catalogs with the same brand names of clothing and etc.i i always enjoyed them ,the spring and summer fall and winter and best of all your chtistmas one . i would find many things in them and would order all the time please listen , this will help.

August 20 2013 at 10:09 PM Report abuse +1 rate up rate down Reply
ROBINHOOD

Ron Johnson came to JC Penny's from Apple. Apple has locked in customers and locked in demand. Penny's doesn't. So He made the very common and stupid mistake of changing JC Penny's to something that He was more familier with instead of learning the company and the business. This happens often but what is worse is how long it took them to get rid of Him! I wouldn't hire Him to run a convience store.

August 20 2013 at 10:02 PM Report abuse rate up rate down Reply
betty_brock

I was also in Penney's today. JUNK, nothing but junk. May as well go to Walmart.

August 20 2013 at 8:11 PM Report abuse rate up rate down Reply
Betty's

I was in Penney''s today. Had a ten dollar off of 25 and couldn't find anything to buy. They wanted to get ride of the image of being a store for older women and they have driven off their major buyers because the clothes are all geared toward the trends. The women who kept Penney's going no longer shop there because there's nothing for them

August 20 2013 at 7:22 PM Report abuse rate up rate down Reply
George

they need to change the name of the store! if it was called something else that didn't relate to "J.C.Penny" the younger generation might shop there! my girls are around 40 and they won't step foot in there because of it's reputation for being a "grandma" store from when they were young. they are the young professionals with the money to spend now. that's the only way you will survive! it doesn't matter who runs the show at this point....sell and start over!

August 20 2013 at 7:15 PM Report abuse rate up rate down Reply