After losing its president two months ago, enduring about 350 layoffs last month coupled with a new pricing strategy unveiled this month, what else can happen to J.C. Penney? Its second-quarter financial results, which don’t bode well for the immediate future.
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Same-store sales – a key metric that tracks stores open at least one year – declined 21.7% in the second quarter. Total sales decreased 22.6% for the period ended July 28, which includes the effects of the company’s exit from its outlet business. Online sales through jcp.com totaled $220 million in the second quarter, reflecting a whopping 32.6% decrease from last year.
J.C. Penney CEO Ron Johnson said in a press release that after the company’s first six months of its transformation, business “continues to be softer than anticipated,” but he’s confident the transformation of J.C. Penney is “on track.”
The transition from a highly promotional business model to one based on everyday value will take time and “we will stay the course,” Johnson added. “This month we simplified our pricing, launched the first of our new shops, and accelerated our marketing efforts to focus on brands, products and value. Early response to these efforts has been very encouraging.”
Johnson said that the company’s “rock solid balance sheet will support the execution of our transformation and position us for growth beginning in 2013.”
Neil Stern, retail analyst and senior partner for retail consultancy McMillan/Doolittle, said J.C Penney is definitely in the “dark tunnel” days now. Stern pointed to significantly lower sales and margins while the company transitions the pricing strategy.
“Online sales absolutely show the impact of a relatively static pricing model when the customer can easily shop and compare,” Stern said. “The real changes with J.C. Penney are occurring with the merchandise transformation and physical makeovers in the stores. It really is too early to judge the company until those changes begin to become apparent to the customer.”
Jim Tierney ([email protected]) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.