JC Penney Going for Broke / Luxury Conference in Boston, MA

Ron Johnson’s Original Turnaround Plan for JCP – Circa April 2012

The Gist:

Less than a year ago, I wrote about JCP’s “square pricing” strategy created under CEO, Ron Johnson. The pricing strategy was intended to help the retailer grow its business, however, latest indications show the company has recorded four consecutive quarters of decline.

In combating the consumer backlash, Mr. Johnson is rolling out some of the previously discontinued sales that JCP is known for. There is no indication as to how many sale campaigns the retailer will bring back, but JCP’s CEO has vowed not to return to levels where the company ran up to 600 sales promotions each year. Supposedly, the retailer is going to introduce a limited number of promotions that tie in with the core habits of its consumer set – shoppers who only buy when they need something and require high value.

It’s bad enough that most of JCP’s consumers have decided to shop at its competitors (Kohl’s, Target, Dillard’s, and Macy’s to name a few). What’s worse is that Wall Street investors have also lost confidence in the stock. After losing more than half of its value, Penney stock is now trading at around $19. The company will also find it hard to raise capital as its credit rating is in the realm of “junk status”.

There is still no light at the end of the tunnel for Ron Johnson’s (RJ) turnaround. Though I was very pessimistic (and correct) in my initial assessment in April, 2012, I wouldn’t quit on RJ just yet. You do know he turned Apple and Target’s retail performance around, right? The past is the best predictor of the future. I just might roll the dice on some JCP stock.

Question

Where do you need to be this month?

Harvard Business School

Answer

In Boston, at the Retail and Luxury Goods Conference, at Harvard Business School. It happens every year (this is the ninth) and is never a dull event. I had some of my best professional moments there. If you can’t make it, you can trust that I’ll take notes for you.

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Luxury, Retail, or Otherwise… Looks Count – Job Postings too.

Note: There’s a link to some jobs at the bottom of the post.

Last week, our Luxury and Retail Club had an event at the Mason School of Business. The event was titled “Looks Count – A Presentation on Professional Dress for Men and Women”. Here’s how we described the event: Continue reading

#HBSRLGC – Day 2: Emerging Markets Panel

4/15/12 – After the keynote address from Max Azria, I went on to some of the panel sessions. The panel sessions are a little more intimate than the keynotes because you get to hear different perspectives on the same issues that concern retailers today. You’ll see competitors, collaborators, and disruptors in the same room. This year there were four panels and I attended two:

Emerging Markets – The panelists were:

  • Anya Ayoung Chee – Designer, Project Runway Winner
  • Kai Schoppen – CEO, Brandsclub Group
  • Malte Horeyseck – Co-Founder and Managing Director, Dafiti
  • Tikka Karpurthala – Chief Representative in Asia for Moet-Hennessy/Group Advisor Louis Vuitton, India

New Business Directions – The panelists were:

  • Anthony W. Campbell – EVP of Administration, Vice Chairman’s Office, Perry Ellis International
  • Julie Bull – Director of Investor Relations, Dillards
  • Mark Bonchek – SVP Communities and Networks, Sears Holdings
Here are the tweets to catch you up on what went on in the Emerging Markets panel.

Continue reading

#HBSRLGC – Day 2: Max Azria

Two Crazy Guys - Max Azria (Founder, Designer, Chairman and CEO, BCBGMAXAZRIAGROUP) and Edmund Amoye (LuxRe Club, Mason School of Business)

On day two (Sunday 4/15/12) at the Harvard Business School Retail and Luxury Goods Conference (HBSRLGC), we kicked off the day with breakfast, which was not attended by yours truly.

I was having too much fun walking around Boston... literally.

However, my day was off to a a memorable start with the second keynote address by Max Azria – Founder, Designer, Chairman and CEO, BCBGMAXAZRIAGROUP. This is a man I have always admired for his perspective on fashion – and have respected for his vision with the Herve Leger brand. Meeting the man was something I wasn’t expecting and the HBSRLGC helped me do that. I tweeted so much at this conference that I’m just going to use my tweets document my experience. Enjoy. Continue reading

HBSRLGC – Boston, MA: Day 1

So I was in Boston for the annual Harvard Business School Retail and Luxury Goods Conference (HBSRLGC). Yes, I know that’s a long acronym. I’ll document my days in Boston (4/14/12 to 4/15/12) with pictures and tweets (yes – tweets).

A Sculpture at Back Bay Station - by George Greennamyer, 1976

After coming out of the station I took this picture of the entrance to the Back Bay Station:

Right across the street from Back Bay Station is an iconic property – Copley Place. This was a good experience for me because just the day before I had the pleasure of conversing with Howard Elkus and Ken Himmel, famous architect and renowned developer respectively.

Copley Place consists of multiple connected buildings. Here is a picture of a pedestrian bridge over Stuart St.

NW Elevation of Copley Place

NW Entrance of Copley Place

Took the Orange Line from Back Bay to Downtown Crossing, transferred to the Red Line and went on to JFK/UMass where I stayed at the DT - Boston Bayside

Left the hotel and went to Harvard Square Station via the Red Line

Later in the evening around 6pm, I went on to the Sheraton Commander Hotel for a networking session and keynote address by Steven Kolb, CEO, The Council of Fashion Designers of America (CFDA). He set the conference off on a good tone discussing the role and history of the CFDA as well as its efforts to push intellectual property rights for designers in the US.



JCPenney’s New Retail Strategy Expected to Hurt Performance

Article Link – Penney’s Pricing Strategy takes a Toll on Sales

Ron Johnson’s bet on JCP’s new retail strategy will not come without its costs. Analysts on Wall Street are expecting JCP’s revenues to drop by “seven percent this fiscal year”. This is worse than the previously forecasted two percent drop because analysts believe “shoppers accustomed to seeing big discounts [will] go to rivals like Macy’s Inc.”. Same-store sales are expected to drop nine percent – lower than the four percent drop that was originally anticipated.

Penney’s new strategy is simple – three tiers:

  • “Everyday” prices that are 40% lower than what they were charging a year ago;
  • Month-long sales on select items; and
  • Clearance events during the first and third Friday of each month (to coincide with employee payroll distributions)

Though the street expects dire consequences for JCP’s stock in the short term, it also believes that Ron Johnson’s plan will pan out in the longer term by eliminating “unprofitable promotions and [improving] its profit margins overall”.

If successful, this will be a major change in retailing because suddenly the promotional activity will decrease and other retailers will also have to find ways to attract customers… but this is going to take time.

– Walter Loeb, New York-based retail consultant

JCP is expected to offer more details on its performance when it reports its quarterly earnings results in May.

My View: This is a long-term bet, not a strategy that will yield postive returns in the next six to 12 months. Ron Johnson is not trying to change his strategy – he is trying to change the rules of the retail game. His bet is riding on a revamp of the entire retail experience.

Disclaimer: I do not own, or plan to buy any JCP stock in the next 48 hours.