NEW YORK — J.C. Penney Co. has hired an executive from the mac-and-cheese world to reconnect with its middle-income shoppers.
The beleaguered department store on Monday named Kraft Foods Inc. executive Debra Berman as senior vice president of marketing to help revitalize the struggling brand, filling a void in the company that remained for 14 months.
Penney is trying to win back customers who fled during a transformation plan spearheaded by chain’s former CEO, Ron Johnson, that backfired and led to massive losses and sales drops.
Berman, 45, who has worked for Kraft since 2009, served as vice president for marketing strategy and directed global brand strategy for all Kraft-owned brands, including Velveeta, Philadelphia cream cheese and Kraft macaroni and cheese.
J.C. Penney, which is based in Plano, Texas, said Berman joins the company’s executive board and will report directly to CEO Mike Ullman III. The appointment took effect Friday.
The appointment, however, did little to boost investor confidence. Shares fell more than 1 percent , or 16 cents, to $14.13 in morning trading. The stock has been down 30 percent since January 2013 and has lost nearly 70 percent of its value since early 2012, when investor bullishness about Johnson’s turnaround plan pushed shares up to $43.
Berman fills the void left by Michael Francis, who departed in June 2012 after being hired by Johnson eight months earlier. Francis, who was president and marketing chief, was responsible for marketing a new pricing plan created by Johnson. After Francis left, Johnson himself oversaw marketing, until he was fired in April.
Berman’s appointment is the latest management change under Ullman, who returned to Penney’s helm in April when the board fired Johnson after only 17 months on the job. Since then, nearly a dozen senior executives, many hired by Johnson, have left.
Ullman is trying to replace them to help reverse Penney’s fortunes. He’s also working to stabilize the business by bringing back basic merchandise and more frequent sales that were eliminated by Johnson in a failed bid to attract younger, hipper customers.
However, analysts say that while traffic is improving as a result of stepped-up discounts and the return of brands like St. John’s Bay, there has been no evidence of a turnaround yet as the company heads into the bulk of the critical back-to-school shopping.
Even the home area, which was Johnson’s project and features a slew of trendy new names like Jonathan Adler and Michael Graves, has failed to resonate with shoppers, analysts say.
Penney was counting on the new home area, launched this spring, to reinvigorate customer traffic, but expensive items like $3,000 sectional couches have turned off its middle-income shoppers. On Penney’s website, home merchandise is being discounted anywhere from 20 percent to 50 percent.
Deborah Weinswig, an analyst at Citi Research, believes that lack of a full-scale management team is holding the company back
“We do not think it is realistic to expect business to improve without a full management team and turnaround plan in place,” Weinswig said in a note published last week. “(The company) is operating with a ‘Swiss cheese’ executive team, and we think the company has had a difficult time finding talent.”
Once a cheerleader of the stock, Weinswig downgraded the shares to “Sell” last week from “Neutral.”
Erik Gordon, a business professor at the University of Michigan, agrees Penney faces challenges.
“(Berman is) a well-respected marketer, but can she sell blouses in malls?” he said. “Penney’s learned from Ron Johnson that marketing success doesn’t always transfer,”
At least, given Berman’s background in the food business, “she won’t repeat the mistake of being too hip,” Gordon said.
Penney amassed nearly a billion dollars in losses and its revenue dropped 25 percent for the fiscal year that ended Feb. 2 in the first year of the failed transformation strategy. Losses and sales drops continued into the first quarter, as the shadow of Johnson’s legacy remained. Penney is expected to report second-quarter results Aug. 20.
Analysts are expecting Penney to post a 7.3 percent drop in revenue at stores open at least a year for the period on top of steep declines a year ago. The measure is considered a key indicator of a retailer’s health.
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