A JC Penney Heyday…for the Bears

What a day for the bears and naysayers weighing in on Michael Francis’ departure from JC Penney. Media–land has been bombarding me for comment. And, my email box is stuffed with some measured and logical attacks, others actually creative and humorous. Regardless of my response to the event of Francis’ exit (which didn’t change my story and “I’m sticking to it”), I would be remiss in not sharing some of their commentary, anonymously of course.

From Mr. or Ms. Measured and Logical

My suspicion is that JCP is seeing that the strategy is not working.  However, rather than admit a mistake in the course in which they’ve invested so heavily, it’s much easier to blame the implementer. Therefore, I think that Francis leaves, JCP continues the strategy, sales continue to fall, and it takes them another year to admit that management and the Board think it’s a great idea — but their customers don’t.

The effort to eliminate proliferating sales has been going on since the invention of the pushcart. Remember that Macy’s tried abruptly cutting coupons when they re-branded the May Company stores, and it was a disaster that was quickly reversed.  I think that most customers simply don’t recognize value without seeing the differential between a regular and a sale price.   It’s even harder to change behavior and perception now, given that Penney’s core customers are currently feeling uncertain about their home values, their 401(k)’s and their general financial well-being.

The question will be whether Penney has the courage to admit a mistake before the sales declines simply force their hand.

From Mr. or Ms. Flattery Will Get You Nowhere, But Great Theater (and if I were writing about my favorite piñata, Eddie Lampert, I might have taken this person up on their suggestion).

So what do you think of the departure of Michael Francis?

Since you know where I sit on the JCP situation I thought you might want to write an article…”Machiavelli Madness”….you always have such witty and well written blogs and articles.

Listen … it is not the marketing … it is the strategy … and that is pretty top down … so now how does he recruit when he blames it all on others …

So we have discussed, Ego, Hubris and Echo…with regard to the JCP situation, why not add Machiavelli … seems like we have quite a play going on here and the media isn’t even doing it justice.

I know you believe it will all work out … I remain deeply in Missouri on this one and now to see the “blame game,” well that leaves me a bit confused.

Meanwhile here’s to Fathers Day at JCP where I hear comps were down over 25 percent…

Eddie slowly starves them … and Ron wants to remake them in his idealistic image … both while different, are not successful. I am long Macy’s.

My Answer

As usual, you provide a logical and humorous perspective. I could do this but would then have to eat crow before I want to or believe I have to.

His Response

Well-seasoned crow, if deboned carefully, is actually quite good … just ask some of the displaced JCP associates now on food stamps … we could do an Iron Chef event … the secret ingredient is …”crow” … chefs in the kitchen, Ackman, Johnson and you …could be fun and exciting and would be a good fundraiser for kids in need of school funds whose parents worked at JCP.

From Mr. or Ms. Strategy Expert

Never one to say “I told you so” … the Mike Francis story will keep your presses operating “over-time” and in my opinion (between us) the worst is yet to come … before ( if ) the storm clouds clear.

From Mr. or Ms. Thoughtful Assessment

Interesting with Francis out so quickly. S**t rolls downhill. Johnson had to have bought into the strategy or maybe even was an author. There was probably no value in having merchants report to him (and sourcing,  which he may have had also).

One could look at this as one bump in the road over a several year program, but I haven’t been as optimistic as you or Bill Pac-man (oops – Ackman), on Penney’s future.

I think Macy’s is doing such a good job at the level above Penney that I don’t see Penney capturing the more affluent or more fashion conscious  customer, and while Kohl’s has also hit some bumps, I don’t see them losing the value customer to Penney. Kohl’s also has the location advantage of the customer being able to park right near store, since they are not in malls.

The good thing about retail is you will never run out of stories for the Robin Report.

From Mr. or Ms. Doomsday

The problem is simple.  They’re not selling iPads and iPhones.  Amazing that the market didn’t grasp this at first.

It does take a lot of hubris to initially take the credit for the perceived brilliance of it all but then dump it on the fall guy.  But I guess thats what so many CEOs do.

I don’t know if anyone could have saved JCP, but this is accelerating their decline.  Quality vendors aren’t going to want to walk into this s**tshow.  But that’s the Catch-22 because a key part to the whole strategy is attracting new vendors.  With $3B in debt, and a large Cap Ex program required to implement the strategy, but no earnings, it could be terminal.

From Robin Lewis

I’ve heard everything from Francis is the fall guy to he had too many parts of the operation reporting to him, others that he has never been a merchant – only a marketer, and they really need a merchant, and so forth, and all of the above.

My opinion rests pretty much on what Ron Johnson said in their most recent analysts’ presentation – and again in his interview with WWD –  that they had done a poor job in educating their customer on the fair and square pricing strategy, thereby resulting in the “cold turkey” response of their “hooked on promotions” addicted customers; namely chasing after their “fix” wherever they can find it.

Whether or not the pricing strategy was cooked up by Johnson, Francis, or both, makes no difference. The marketing of the strategy is clearly the responsibility of the executive in charge of marketing. And, that would be Francis. And, that was also revealed inthe WWD article.

It also makes no sense to speculate whether or not Francis disagreed with any new strategy going forward. At the end of the day, the buck stops on the desk of the CEO. Johnson owns the grand vision. If it works, he owns the accolades. If it breaks, he owns the failure.

So, as he also acknowledged, this transformation would be long and hard with a lot of speed bumps. Francis leaving, likely because of a strategy implementation misstep, is just one of those bumps.

I’m still a believer.

Robin Lewis About Robin Lewis

Robin Lewis has over forty years of strategic operating and consulting experience in the retail and related consumer products industries. He has held executive positions at DuPont, VF Corporation, Women’s Wear Daily (WWD), and Goldman Sachs, among others, and has consulted for dozens of retail, consumer products and other companies. In addition to his role as CEO and Editorial Director of The Robin Report, he is a professor at the Graduate School of Professional Studies at The Fashion Institute of Technology.