Let's just say 2012 wasn't the best of years for J.C. Penney or its leader, Ron Johnson, who made many "worst CEOs of the year" lists.
If you're surprised Mr. Johnson made it to the end of 2012, here's something to chew on: He very likely will make it to the end of 2013 as well. Yes, J.C. Penney shareholders, he's a CEO you're stuck with.
J.C. Penney hired Mr. Johnson in 2011 with great fanfare; he was, after all, in charge of Apple Inc.'s gorgeous, packed retail stores. He was in charge of the "genius bar"; clearly, he'd bring some genius to a tired, old-line retailer.
Mr. Johnson's strategy at J.C. Penney can be oversimplified to two key initiatives: One, end the constant couponing in favour of an "everyday low pricing" strategy. And two, bring in hot merchandising partners to operate little "store within a store" boutiques.
The first idea – that low-pricing thing – was a disaster worse than anyone could imagine, as the chain's traditional customers were clearly motivated by gaudy discounting, which Mr. Johnson had likened to "drugs."
Same-store sales – a key retail metric that measures sales in locations open at least one year – fell 18.9 per cent, 21.7 per cent and then 26.1 per cent in 2012's first three quarters. "I expected horrific, but this was worse than expected," analyst Brian Sozzi told the Associated Press after the third-quarter results.
In the last 12 months, J.C. Penney has lost $3-billion in sales, roughly as much as upper-end retailer Saks Inc. sells in a year.
It seems enough to earn Mr. Johnson a ticket out of town. But the second part of his plan – the "store within a store" thing – seems to be working. The "jcp specialty" shops, with brands like Levi's, Izod and Liz Claiborne, produced $269 of sales per square foot in the third quarter, versus $134 per square foot in the traditional, "promotional" J.C. Penney. It's "a tale of two companies," Mr. Johnson says.
The good news – or bad news, depending on how you see it – is that only 11 per cent of Penney's square footage has been converted to the new concept, with 89 per cent remaining.
That, combined with about $2.5-billion in liquidity, means Mr. Johnson will likely be given the rest of 2013 to continue his transformation – no matter how horrific the company's overall results.