Can J.C. Penney Recover From First-Quarter Loss?

One takeaway from the J.C. Penney profit loss is that when your customers bank on weekly coupons and designated sales days, you don’t change a thing. Just check out #JCPenney on Twitter and you will hear from thousands of customers who are not happy with the company’s 2012 facelift:

“J.C. Penney Is an Unmitigated Disaster”

“Apple’s Retail Boss Has Done “Incalculable Damage” To JC Penney”

“Apple’s genius Rob Johnson goes to JC Penney and those are the results? Predicted headline: Johnson Not Magic.”

2012 has brought quite the transformation for J.C. Penney. In just a matter of months it changed its pricing policies and in-store layout; unveiled a new logo and brought in openly gay Ellen DeGeneres as its new spokesperson, much to the disappointment of One Million Moms, which is a division of the American Family Association.

Essentially what J.C. Penney did was place “a new brand face on an old store,” said Liz Kislik, president of Liz Kislik Associates, a human resources and customer service consultancy.

All that change did not fare well, according to the first quarter report, store sales for the first quarter declined 18.9%, total sales decreased 20.1%, and internet sales through J.C. dropped by 27.9% from last year. “A great likeliness is that it’s a direct result of a huge combination of those changes,” Kislik said.

“This was just too drastic of a step,” Kislik said.

“Sociologically, this is a time when coupon usage is not only prevalent but it is regarded as a special skill with special knowledge. Coupons are a point of pride with many people,” Kislik said.

Even before the economy started tanking, long before there was a television show called “Extreme Couponing” on TLC, many Americans flocked to their weekly circulars looking for ways to save a buck. There are countless websites devoted to the craft of penny pinching and by cutting out that part Americana in J.C. Penney’s marketing strategy; they cut out their core shoppers.

And even with J.C. Penney marketing an everyday low price on all its products in place of a weekly sale or coupon, customers just couldn’t figure it out.

“It was not recognized as part of the public persona,” Kislik said. Instead of just telling consumers how much they are saving, you need to make them feel like they are part of the action.

“While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America’s favorite store,” CEO Ron Johnson said in a release. “We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term.”

But according to One Million Moms director Monica Cole, the issue wasn’t about coupons or sale days. The reason for J.C. Penney’s plummeting profits, she says, is based on the issue of homosexuality.
“Sales have plummeted since J.C. Penney showed their new, bold marketing strategy, including pushing a lesbian spokesperson and same-sex couples in their advertising,” Cole said in a statement. “If they would stop pushing a deviant and unhealthy lifestyle and focus on product quality and value along with excellent customer service, their bottom line would not be suffering.”

Johnson came to DeGeneres defense a few months back and told CBS News stood behind DeGeneres as its spokesperson because she shares the same values as J.C. Penney. Our company was founded 110 years ago on The Golden Rule, which is about treating people fair and square, just like you would like to be treated yourself. And we think Ellen represents the values of our company and the values that we share.”

So, the question still remains: Can J.C. Penney recover? Absolutely, said Kislik. J.C. Penney can educate its customers about its new pricing policy and, if need be, go back to its couponing ways.

“It’s embarrassing, it’s a loss of face, it still won’t work as well, but it is doable,” Kislik said.

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