Can decorative pillows save JC Penney?

April 5, 2013
April 5, 2013

JC Penney’s business has been in free fall over the last year. Sales at the American department-store chain have plummeted and the company has been burning through cash. Today, JC Penney launches a crucial part of its turnaround: boutiques that sell home goods within its department stores. The reception of this strategy will help determine whether CEO Ron Johnson gets to keep his job.

Johnson’s reputation as a retail guru began at low-cost megastore Target, where he worked on home goods and helped popularize the cheap chic trend. He later went on to helm Apple’s stores, and his success there is the reason he was brought into JC Penney. But since he arrived at the retailer, he has faltered. Johnson decided to get rid of the main component of JC Penney’s sale strategy, which was to offer frequently-changing discounts and coupons. Instead, he initiated an everyday low price campaign, which most customers rejected.

It’s been downhill ever since. JC Penney’s stock has lost about 57% of its value since Johnson took over. His compensation reflects JC Penney’s performance—it was cut by 96%. But at least he still has his job, for now. Tens of thousands of JC Penney employees have been let go recently.

Johnson sees home goods as an opportunity for JC Penney to boost sales. The boutiques will feature products by designers like Jonathan Adler, known for his bright, modernist designs. But a legal dispute with Macy’s over Martha Stewart products means JC Penney will feature a limited number of offerings from her line. The retailer has also brought back its strategy of discounts, so that will extend to the boutiques.

The question is whether this is coming too late. JC Penney lost many customers, and it looks like a bulk of them didn’t return even after it brought back discounts. The home goods boutiques may be an enticing experience for customers, but there are already fewer of them to appreciate it.

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