Loyalty factor

Ultimately, J.C. Penney’s fate lies in the once-loyal shoppers like Beth Williams, 39, who deserted the chain last year.

The writer and mother of a 3-year-old from Plum, Pa., said she used to shop at Penney once a month. But that changed when her local store got rid of coupons and sales events. She also doesn’t like the new styles that she believes only target customers in their teens and 20s.

Williams said she would go back if Penney had more sales and brought back more traditional clothing.

“I miss it,” she said. “That was my go-to store for a long time, and then it changed.”

Source: AP

There won’t be an easy fix for J.C. Penney — if it is even fixable.

As Mike Ullman takes the reins again less than two years after his departure, he faces a Herculean task to undo the mess left by his predecessor, Ron Johnson, who was ousted Monday. With the department stores in the middle of a disastrous overhaul that has driven away shoppers, the 66-year-old Ullman has to quickly figure out what parts of Johnson’s legacy to keep and what to trash.

The overarching question is whether the century-old retailer can be saved at all. Very few retailers have recovered from sales declines of 25 percent in a single year that Penney suffered under Johnson’s watch. On Tuesday, the retailer’s stock price dropped more than 12 percent to a 12-year-low of $13.93 as investors’ worries escalated about Penney’s future. “Ullman can’t go back to the old ways, but he can’t do what Ron Johnson did,” said Ron Friedman, head of the retail and consumer products group at Marcum LLP. “I think there will be a combination of the two. But he has to make some quick moves.”

Apparently, the company’s board felt Ullman, who served as Penney’s CEO for seven years and is known for strong relationships with suppliers and calm, steady execution, would be the best choice to secure the future right now.

The board’s firing of Johnson, the mastermind behind Apple Inc.’s successful retail stores who held the Penney job for 17 months, comes after a growing chorus of critics called for his resignation as they lost faith in his aggressive overhaul. The rapid-fire changes included getting rid of coupons and most discounts in favor of everyday low prices, bringing in new brands and remaking its outdated stores. Johnson’s goal was to reinvent the stodgy retailer into a mini-mall of hip specialty shops.

Penney’s loyal shoppers in search of deals went elsewhere, and the chain didn’t attract the younger and more affluent shoppers Johnson coveted. Now the 1,100-store chain is burning through cash. In the past year, the company lost nearly a billion dollars and saw its revenue tumble nearly $4.3 billion to $12.98 billion. Customer traffic dropped 13 percent from the year before.

Burt Flickinger III, president of retail consultancy Strategic Resource Group, said it could take Ullman 18 months to stabilize the business. But overall, he gives the chain a 50-50 chance to survive. “The odds are declining every day,” said Flickinger, noting that rivals are taking away market share. “Competitors see blood in the water.”

Some speculate that Ullman may ditch the everyday price strategy and instead ramp up the return to discounting and coupons to get shoppers back in the store. But that will still be an expensive move.

Ullman will also have to find ways to boost employee morale amid severe head-count reductions. As of February, Penney employed 116,000 full- and part-time workers, down from 159,000 a year ago.

Whatever Ullman ends up doing, analysts expect him to be thoughtful and deliberate in his moves. That’s a big difference from Johnson, who was criticized for not testing his strategies in a few stores, particularly the pricing plan.

In a statement Monday, Ullman said he plans to immediately “engage with the company’s customers, team members, vendors and shareholders, to understand their needs, view and insights.” With that knowledge, he will work with the management team and the board to develop a game plan.