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Dayton
Business Journal
J.C.
Penney
analyst: ‘CEO has to go’
Dallas
Business Journal by Steven R. Thompson
Wednesday,
July 11, 2012
After J.C.
Penney cut 350 employees from its Plano headquarters Tuesday, retail
analysts
said they are unsure how the company can continue to follow through
with its
transformation strategy. One analyst even said it was time for CEO Ron
Johnson
to leave.
“The next
step is the CEO has to go, I guess,” said Howard Davidowitz, chairman
of New
York-based Davidowitz & Associates, a retail consulting and
investment-banking firm. “Because if it stays like this, the question
will be,
‘What credibility does he have to do anything?’ He will have lost all
credibility.”
Davidowitz
has previously made his position on the J.C. Penney transformation
clear,
saying Johnson “caused incalculable damage” to the department store
chain.
Other
retail experts expressed more optimism about J.C. Penney’s plans, even
as they
said they were uncertain about the company’s turnaround.
“It is
probably more of the same as they try to reduce their cost, but they
are under
a ton of pressure,” said Dwight Hill, managing partner at the
Plano-based The
Retail Advisory. “I am still fairly bullish about their strategy, but
I’m not
sure Wall Street is going to be patient enough for them to continue to
go down
this path.”
J.C. Penney
(NYSE: JCP) said Tuesday’s job cuts were part of the company’s plan to
cut $900
million in annual expenses by the end of 2012. J.C. Penney executives
declined
requests for an interview.
The company
needs to do a better job of communicating that the layoffs are part of
a
“multi-stage turnaround process,” Hill said.
“With sales
dropping as they are, they have an even greater need to reduce this
SG&A
cost,” Hill said.
The drop in
sales is mainly due to the lack of coupons, Davidowitz and Hill agreed.
“They’ve
begun to realize the coupon and sales addiction probably runs far and
deep,”
Hill said. “And customers don’t want to go cold turkey.”
Davidowitz
didn’t offer many solutions for J.C. Penney, saying, “I’d have to spend
months
figuring out what to do because the mess is so deep.” He still can’t
believe
that J.C. Penney would abandon its core customer so quickly in order to
test a
new pricing and marketing strategy.
“People in retailing fight for decades to
get market share,” Davidowitz said. “And here’s the reason, because it
costs a
fortune to get a new customer. You advertise, you spend a fortune to
get a new
footstep to give you a chance. It’s what retailers work on every day,
‘Let’s
try to get this customer to give us a little opportunity.’”
Read this and other articles at the Dayton
Business Journal
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