J.C. Penney analyst: ‘CEO has to go’

By Posted in - Uncategorized on July 14th, 2012 1 Comments

J.C. Penney analyst: ‘CEO has to go’

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Dallas Business Journal by Steven R. Thompson, Staff Writer
Date: Wednesday, July 11, 2012, 5:30am CDT – Last Modified: Wednesday, July 11, 2012, 5:41am CDT
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J.C. Penney laid off 350 Tuesday at its headquarters in Plano.

After J.C. Penney cut 350 employees from its Plano headquarters Tuesday, retail analysts said they are unsure how the company can continue to follow through with its transformation strategy. One analyst even said it was time for CEO Ron Johnson to leave.
“The next step is the CEO has to go, I guess,” said Howard Davidowitz, chairman of New York-based Davidowitz & Associates, a retail consulting and investment-banking firm. “Because if it stays like this, the question will be, ‘What credibility does he have to do anything?’ He will have lost all credibility.”

Davidowitz has previously made his position on the J.C. Penney transformation clear, saying Johnson “caused incalculable damage” to the department store chain.
Other retail experts expressed more optimism about J.C. Penney’s plans, even as they said they were uncertain about the company’s turnaround.
“It is probably more of the same as they try to reduce their cost, but they are under a ton of pressure,” said Dwight Hill, managing partner at the Plano-based The Retail Advisory. “I am still fairly bullish about their strategy, but I’m not sure Wall Street is going to be patient enough for them to continue to go down this path.”

J.C. Penney (NYSE: JCP) said Tuesday’s job cuts were part of the company’s plan to cut $900 million in annual expenses by the end of 2012. J.C. Penney executives declined requests for an interview.
The company needs to do a better job of communicating that the layoffs are part of a “multi-stage turnaround process,” Hill said.
“With sales dropping as they are, they have an even greater need to reduce this SG&A cost,” Hill said.
The drop in sales is mainly due to the lack of coupons, Davidowitz and Hill agreed.

“They’ve begun to realize the coupon and sales addiction probably runs far and deep,” Hill said. “And customers don’t want to go cold turkey.”
Davidowitz didn’t offer many solutions for J.C. Penney, saying, “I’d have to spend months figuring out what to do because the mess is so deep.” He still can’t believe that J.C. Penney would abandon its core customer so quickly in order to test a new pricing and marketing strategy.

“People in retailing fight for decades to get market share,” Davidowitz said. “And here’s the reason, because it costs a fortune to get a new customer. You advertise, you spend a fortune to get a new footstep to give you a chance. It’s what retailers work on every day, ‘Let’s try to get this customer to give us a little opportunity.'”

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  • jon terns - Reply

    December 30, 2013 at 5:11 am

    How is it that they can transform all of their stores into more sectioned boutique styled themes but they can’t keep employees and are having budget problems?

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