J.C. Penney's turnaround strategy under Ron Johnson's leadership

Retail/Fashion Marketing on J.C. Penney

In some quarters, it has been reported that J.C. Penney could turn out to be one of the most interesting retailers to watch this year. This is more so the case given the company's ambitious turn around plan as well as a new management team led by Ron Johnson. This text concerns itself with the department store. More specifically, the company's key executives, competition as well as financials will be discussed.

J.C. Penney: An Overview

Headquartered in Plano, Texas and founded sometimes in the year 1902 by entrepreneur James Cash Penney, J.C. Penney according to Yahoo Finance concerns itself with the sale of "family apparel and footwear, accessories, fine and fashion jewellery, beauty products, and home furnishings." Further, the store undertakes the provision of a number of services including but not limited to custom decorating and styling salon. Apart from offering its products for sale through its various department stores, J.C. Penney also makes use of its website to conduct business online. As Mattioli and Adams note, the entity recently purchased a stake in Martha Stewart Living Omnimedia, Inc. In what could see J.C. Penney turn around its house ware business which has not been performing well in recent times. The company operates in the Department Stores industry and according to Yahoo Finance, it has 159,000 full-time employees.

The Company's Key Executives

J.C. Penney's current chairman is Thomas J. Engibous. Mr. Engibous also sits on the firm's audit committee. On the other hand, the company's chief executive officer is Ron Johnson. Ron who joined J.C. Penney in mid-2011 has an excellent track record having served successfully in various positions both at Target and Apple. At Apple, Ron is mostly remembered for the role he played in launching the entity's retail stores. True to his reputation, the C.E.O has already started changing J.C. Penney's business strategy. Amongst the raft of changes he has proposed (some of which will be discussed in greater detail later on in this text) according to Heller include but are not limited to a new pricing strategy as well as a new store layout.

The current president of the firm is Michael R. Francis. According to Heller, Mr. Francis was poached from Target by Ron. While at Target, Francis was instrumental in the retailer's marketing as well as branding efforts. It is therefore likely that he will bring into J.C. Penney the wealth of experience he accumulated while at Target. The other key executives at J.C. Penney include Michael Dastugue and Michael Kramer who happen to be the entity's C.F.O. And C.O.O. respectively. Dastugue has been with J.C. Penney for quite a long period of time during which he has served in various capacities. Kramer joined the firm during the last quarter of last year. Previously, the C.O.O. had served in various capacities in different companies including Abercrombie & Fitch Co. And Kellwood Company.

An Overview of the Firm's Performance

In comparison to the previous financial period, J.C. Penney experienced a decrease in profitability by registering a net loss of $152 million. The company's total revenues also decreased by 2.8% to stand at $17.26 billion in 2012. A look at J.C. Penney's income statement attributes the company's decrease in profitability largely to non-recurring expenses. Within the period under consideration, J.C. Penney's non-recurring expenses rose from $32 million to $451 million. The company's selling general and administrative expenses also increased by $334 million within the same period. However, it can be noted that despite the decrease in profitability, the company's financial fundamentals are still sound. For instance, the company's current ratio of 1.8 (obtained by dividing J.C. Penney's current assets with its current liabilities) suggests that the company would be able to settle its short-term obligations if and when they became due. On the other hand, the company's debt ratio (computed by dividing its total debt with the total value of its assets) is 0.65. Given that this ratio is an indicator of the company's debt proportion relative to the value of its assets, J.C. Penney can also be said to be stable as far as its long-term solvency is concerned.

J.C. Penney's Marketing Strategies and the Viability of the Ongoing Changes

An effective marketing strategy is critical for the success of any given product in a highly competitive marketplace. In seeking to highlight J.C. Penney's marketing strategy, it would be prudent to highlight its target market as well as its pricing and promotion. In regard to the company's target market, it can be noted that J.C. Penney has largely been successful in seeking to have its products satisfy a diverse clientele. For instance, the store provides women with conservative yet sleek styles which can comfortably be worn to the office. Further, the company also targets teens with its stylish and colorful t-shirts and lingerie. In the final analysis, the company seeks to rope-in middle class Americans purchasing both for their families as well as themselves. Further, in recent times, the store has also been keen to appeal to the younger generation as well. When it comes to pricing, J.C. Penney seems to be pursuing a cost leadership strategy with its adoption of a new pricing strategy. As Heller notes, "this fair pricing strategy is designed to keep prices low on the basics shoppers look for frequently…" in regard to promotion, it can be noted that the company seems to be embracing a more aggressive promotion strategy. This is more so the case given the firm's recent deal with Martha Stewart Omnimedia. As I have already noted elsewhere in this text, the deal could see J.C. Penney turn around its house ware business whose performance has not been satisfactory.

In my opinion, what the company is doing now will have a positive impact on both its sales and bottom-line going forward. For instance, the new pricing strategy could see J.C. Penney increase its sales volume leading to enhanced profitability. Further the fair pricing strategy which Yousuf refers to as "a permanent discount of at least 40% on all items" could also effectively defend the company's market share from both existing competitors and new entrants. Next, J.C. Penney's move to embrace a new management team could end up yielding some positive results as such a move will inevitably change the way things are done at the firm. Indeed, in the opinion of Heller, the incoming management team possesses some radical new ideas. This can be gleaned from the background (as highlighted earlier on in this text) of some of the key executives who have joined J.C. Penney in recent times. I am also convinced that J.C. Penney's new logo will give the company a brand identity that is largely unique. The same in my opinion could in addition to having the effect of repositioning J.C. Penney's brand in its clients' minds also reflect the firm's change of direction as well as focus from a business perspective.

Conclusion

In conclusion, the ongoing ambitious turn around plan being undertaken at J.C. Penney under the leadership of its new C.E.O. could see the company enhance both its profitability as well as market share going forward. This is more so the case given the company's decline in profitability in the recent past. If that happens, J.C. Penney could turn out to be 2012's most impressive retailer.