J.C. Penney Goes Retro

With J.C. Penney's (NYSE: JCP  ) headlong plunge into undoing every change made by former CEO Ron Johnson, it seems everything old is new again. Out are iPad-toting employees who check out customers; in are the old register lines. Gone are the Wi-Fi and "boutique"-style store-within-a-store; here to stay are some of its old, favorite brands, like St. John's Bay. And perhaps most notable of all, everyday low prices are history while doorbuster sales are back.

The changes seem to be having an impact. Although same-store sales at Penney's were down 4% in September from the year-ago period, they were 5.8% higher than August's numbers. And online sales surged 25%, making the back-to-school season one of the best, as Experian Marketing Services says Penney's has owned the No. 2 online retail spot since July, behind only Wal-Mart. All in all, it expects comps to remain positive through the end of the year.

Source: J.C. Penney.

And just to underscore for everyone that change is very much in the air, the latest bit of "undoing" the retailer is doing is the elimination of its old new three-letter logo graphic -- a red square frame with "jcp" in a blue box at the top left-hand corner -- in favor of its classic nameplate.

Ex-CEO Ron Johnson tried to instill a very Apple-like ethic on the retailer, making it more modern, hip, and cool. It was the essence of the changes that were made and informed the look and feel of the store. Except he forgot one thing: his shoppers really are still kind of stodgy more than anything, and change for change's sake is most decidedly not cool with them. The story of how they fled in droves has been written many times, and following an apology tour earlier this year, Penney's has been peeling back as fast as it can the many changes that were made.

It's one of the reasons I went from bear to bull on the retailer last month, believing the bandwagon of critics jumping on the J.C. Penney deathwatch train had grown too long. Although I'm still critical of some of the moves it's making -- like CEO Myron Ullman telling investors the retailer didn't need to raise cash one day before filing to do just that (aren't there SEC rules about that sort of thing?) -- I do like many of the changes it's making and the fact that its financial picture is stabilizing if not improving.

And the return to its old logo is emblematic of the retailer's return to its roots. First, the JCP graphic that's being ditched didn't convey any information about the company. Sure, the Macintosh logo and Nike's swoosh may be enough for consumers to quickly identify with the company, but such modern flourishes don't really fly with an old-line retailer like Penney. Its old banner fits more like a pair of comfy slippers.

Yet let's be clear that we're dealing with a retailer, not footwear, and one that does face changing demographics. It is what Johnson was trying to address with his moves. He may have gone overboard a bit on some, but I think he was correct that Penney's needed change.  A new logo doesn't alter that retail reality.

While its customers are responding to the reversion to the old ways, we have to remember the reason Johnson made them was because sales were falling, going from $19.9 billion in 2007 to $17.3 billion in 2011. While they cratered after he took over, plunging all the way to $12.1 billion in the latest period, he was trying to shelter the company from a coming storm, so there's got to be more than just returning the furniture to where it was before the tornado struck.

My take on Penney's is that once normalcy returns, it can begin experimenting again with how to juice sales. You've got to stop the bleeding before you can stitch the wound closed. My guess is that J.C. Penney will heal in time, and we'll be able to slip into its stores again just as cozily as we once did, but without feeling we're entering in alien territory.

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  • Report this Comment On October 14, 2013, at 2:50 PM, vcdf49a wrote:

    The scary thing about going long with JCP is that Goldman Sachs, aka "the squid" is deeply involved in their recent finances. Once the squid has a firm grip of you in its tentecles, bad things can happen. Just ask the people of Grecee, and the good folks of Jefferson County, Alabama.

    Maybe JCP will have a good Christmas Season (doubtfull), but I would use alot of caution going long. Disclaimer: I has been short JCP for awhile.

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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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