Johnson also made several mistakes early on. The first is that the “price value” proposition made to shoppers is very complex. Some merchandise is labeled as “everyday value.” Johnson created two other discount ranges. One of these changes monthly. The other offers steep cuts in prices every first and third Friday. That is a lot for a consumer to follow, at least among those who are casual shoppers.
Johnson also set a merchandise deal with an 16.6% investment in Martha Stewart Omnimedia (NYSE: MSO). He must not have done much due diligence about Stewart’s existing deals with retailers. Macy’s promptly sued to block the arrangement. It claimed it had a preexisting one that prevented a deal with JCPenney. Johnson looked like a fool. In addition, the Stewart brand is considered old and worn out. Its value was questionable even before the Macy’s action.
Ron Johnson has been unable to convince investors that the obvious is not true. The turnaround of a major retail chain in an already crowded market of successful companies and in the midst of an e-commerce onslaught is impossible. The JCPenney stock price now reflects that realization. All of the gains made when Johnson joined have been lost. JCPenney’s share price is back where it was before his appointment was announced.
Douglas A. McIntyre
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