Has JC Penny Rediscovered a Business Management Secret?

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I posted a bunch last year (search the blog archives for keyword Penny) about my feelings about JC Penny’s actions in abandoning their repositioning strategy. Bottom line was that if the old strategy was not going to achieve the company’s goals, how does bringing it back make sense? I even hypothesized that the company might file for Chapter 11 after the holiday season. (I was wrong on that one.)

Let’s review quickly the facts of their history since returning to their old strategy: Their 2013 holiday sales were up over 2012. Their outlook is positive, their stock price is up and they are re-attracting lost customers from the “failed” repositioning strategy. Simply put, they are getting lots of positive press.

Why? They have not even returned to the levels they were at when the Board decided their original, and now return-to strategy, was insufficient to achieve their goals. Answer: Make things worse for a while and then the old, unacceptable situation doesn’t seem so bad.

Reminds me of the old story about the guy beating his head against a wall and when asked why he was doing it he replied, “Because it feels so good when I stop.”

I reiterate my original position from when the Board fired their repositioning CEO, Ron Johnson: The Board is incompetent, in my opinion. Either the company did not need a repositioning to achieve its goals or it did. You can’t have it both ways. But then again, if you make things worse, then striving to get back to a previously unacceptable position can seem a positive.

Republished with author's permission from original post.

Mitchell Goozé
Mitchell Goozé is the president and founder of Customer Manufacturing Group. His broad scope of business experience ranges from operations management in established firms, to start-up and turn-around situations and mergers. A seasoned general manager, he has headed divisions of large corporations and been CEO of independent firms, always focusing the company strategy on the most important person in business . . . the customer.

3 COMMENTS

  1. Mitch, I agree with your POV about JCP. I’ve been following the company since the hiring of Johnson.

    While Johnson’s failed strategy may have been a case of too much change, too fast, it’s hard to see how retreating to the previous game plan will work.

    Still, as the saying goes, “better the devil you know than the devil you don’t.” The Board lost confidence in making a dramatic transformation, so they will stick with what they know.

    And who knows? It might just work. A sizable segment of the retail market want basic goods and a constant flow of “deals.” If JCP can manage its costs and execute on this strategy, they can make money and survive.

    I wrote more about JCP in this article.

  2. We’re in a trust and reputation economy. J.C. Penney’s retailing flip-flops have become well-known beyond the financial press, and shoppers don’t see enough value and distinctiveness to make them come back. Penney continues to slide toward the path to bankruptcy: http://www.nytimes.com/2014/01/16/business/j-c-penney-plans-to-close-33-stores.html?_r=0

    IMHO, a retrenchment back to price-based retailing will continue to be a challenge for Penney, if they are to recover. The bland, slow, commoditized retail price road is littered with department and specialty chain failures: Caldor, Bradlee’s, Value City, E. J Korvette, Ames, Syms, Filene’s Basement, Circuit City, etc., etc.

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