JCP, Argo, the Golden Fleece, Odysseus, and the Sirens

Written by:



\"greek_chorus\"There is some irony to JCP’s heavy sponsorship of the Oscars relative to Argo winning “best picture.” The fact that the mythical Greek ship Argo and its crew were searching for the elusive Golden Fleece while being protected by the goddess Hera might be a good omen for Ron Johnson. However, there doesn’t seem to be even a mythical protector anywhere in sight, much less a real one. In fact, using another mythological metaphor, Johnson could be like Odysseus, being warned of the Sirens by the Greek goddess Circe. The Sirens were trying to lure him and his ship’s crew to their certain death, being tossed by the sea into the very same rocks and cliffs that Argo was able to sail past. Circe told Odysseus to put beeswax in the ears of his crew and if he felt he couldn’t resist listening, he should have his crew lash him to the mast.

If I were modern day Circe I might view the Sirens as the ever-mounting number of naysayers. But, I don’t suggest he stick beeswax in his team’s ears, nor do I suggest lashing himself to his desk in the “corner office.” Furthermore, he might wish for a modern day Hera to protect him; but, he knew from the start that “Heras” only exist in Greek mythology.

So, enough of Greek mythology.

Reality is Larger than Myth

What a disastrous fourth quarter and first year for JC Penney and Ron Johnson’s visionary transformation of the traditional department store business model. By the numbers, JCP realized a loss of $4 billion in revenues and “unheard of” (one of many expressive quotes) declines in same-store-sales, gross margin, and EBITDA, and on and on.

\"greek_odysseus\"While the “Sirens” have not yet lured his ship to its demise, in reality, the modern-day drums are beating, the vultures are circling, and the Martha Stewart debacle is a sideshow Johnson could do without.

Further, I am now receiving a mounting number of emails from readers and friends, all naysayers who would like to invite me to lunch for a meal of roasted crow. However, as I said in response, “the crow has not yet landed, and my position continues with this statement: in my opinion, the road is simply longer and harder than he expected. And, unfortunately, as a public company, all Wall Street cares about are the numbers.”

Well, call me Morpheus (God of dreams), if you want. I’m sticking to my original opinion. Johnson will complete the transformation by 2015. JC Penney will be a new business model with about 700 totally converted stores, (the remaining having been upgraded), generating about $300 per square foot versus roughly $180; and will be poised for growth versus decline. Furthermore, JCP will continue to lose their older, lower-end customers (at least through transformation), but when it becomes the great new experience as Johnson envisions, they will build a new customer base made up of younger, middle class, aspiring families.

So, it is not about “getting their customers back” as all the naysayers keep harping about. It’s about gaining a new consumer core aligned with the new JCP branded “mini-mall” of specialty shops. And, they will steal share from the young family segments of their competition.

Having once again stated my opinion, we do live in a real world in which public companies are under more scrutiny than ever, and in which “short-term” numbers drive short-term decisions; and one in which Boards are sometimes driven to take short-term decisive action as well.

And, to that point, there have been articles, un-sourced, suggesting the Board may in fact, be getting impatient. However, major shareholder, and hedge-fund billionaire, Bill Ackman, has from the beginning, and continues to be, one of Johnson’s biggest supporters, according to an un-named source. Perhaps he is Johnson’s “Hera.”

However, according to the “numbers” guys, Ron Johnson and team must begin delivering growth, sooner rather than later; the first quarter of 2013 might prove to be the tipping point, either way.

Damn the Sirens and Short-Termers: Stay the Course

Johnson has said it all, honestly and unabashedly. It’s taking longer and with more “bumps” than expected, and he’s had to learn by making some big mistakes. However, he has also said that this is a “marathon, not a sprint,” and that tactics may have to be changed or tweaked. He has also said this is a “start up,” which it is, because there will be no other retail model exactly like it, if it reaches its intended conclusion.

Among those of us who agree with his vision and its end game, it would indeed be a tragedy if “tactics” and “short-term” thinking brought it all down.

So, we are rooting for Ron Johnson to stay the course, turn the “learnings” from the mistakes into action, fast. And, get the “numbers” moving in the right direction, even faster.



Scroll to Top
the Daily Report

Insights + Interviews right to your inbox.