J.C. Penney Company, Inc. (JCP): Looking Back at Ron Johnson’s Company

By my own count, I have written five articles in the last 12 months regarding beleaguered retailer J.C. Penney Company, Inc. (NYSE:JCP). My general thesis was that Ron Johnson, former Apple retail executive, was the saving grace of the company and needed to be given a few years to conduct one of the biggest reorganizations ever for a public company. Well, that year’s worth of content was shredded to pieces on Monday as Johnson is officially out the door at J.C. Penney Company, Inc. (NYSE:JCP). Before I admit defeat on this long-defended thesis, let’s highlight the (few) good things that happened.

Legacy’d
Upon Johnson’s hiring in late 2011, J.C. Penney Company, Inc. (NYSE:JCP) was a bloated mess of a company with ancient legacy systems costing billions every year. Johnson attacked this head-on, and the company announced it was on track to deliver $900 million-plus in savings. Inventory levels were cleaned up, old POS (pun intended) systems were thrown out, and J.C. Penney became a relatively innovative retailer, especially among dinosaur department stores.

I don’t think many executives could have done this with near the efficacy and precision that Johnson did, and he should be commended for it. Did it save the company? The truth is we still don’t know. The past year’s results have been dismal and hard to swallow for bulls and bears alike, but the cost-saving effort has left J.C. Penney Company, Inc. (NYSE:JCP) able to focus its (dwindling) cash hoard on acquiring new brands and attracting customers — even if the latter have yet to materialize.

The famed, ill-fated concept
It will be very interesting to see if Mike Ullman, former and now reinstated interim CEO, keeps the company on its “store of stores” track that Johnson fathered. I still believe this is the company’s greatest shot at regaining relevance in the retail world. J.C. Penney Company, Inc. (NYSE:JCP) has suffered from a home goods section that resembled your great-grandmother’s attic and clothing styles that Bill Cosby wouldn’t even touch. It needed the refresh that Johnson envisioned and began to create. His error was in the execution.

Where Johnson went wrong was assuming he could wean customers from the deep-discount model overnight, and simultaneously bring in the new cool kids who had their parents’ credit cards. None of that happened.