March 28, 2024

JC Penney Sales Plunge as Shoppers Spurn Price Strategy

Still, Johnson told investors on Friday that he was “100 percent committed” to his plan for the century-old retailer, which includes eliminating most coupons and sales events and converting about 700 of its 1,100 stores into collections of boutiques, such as Levi’s Denim Bar.

But the new strategy appears to keep driving customers away, with traffic down 12 percent in the third quarter.

J.C. Penney shares tumbled 9.7 percent to $19.58 in premarket trading.

Same-store sales fell 26.1 percent in the latest quarter, ended October 27, while analysts had expected a decrease of 17.9 percent.

Same-store sales declines have gotten worse each quarter under the new strategy, falling 18.9 percent in the first quarter and 21.7 percent in the second quarter.

Walter Loeb, president of retail management consultant Loeb Associates, expressed concern about Penney’s performance during the upcoming holiday shopping season.

“I expect a big drop in sales” Loeb said. “(Johnson) must generate traffic. I think he has to be more promotional.”

There have been signs that the first few boutique shops, which include Izod and Liz Claiborne, have won over customers, but they represent only a small fraction of sales.

Johnson is supported by activist investor William Ackman, whose Pershing Square Capital Management is Penney’s largest shareholder and who was at the investor presentation on Friday.

In a statement, Johnson, who took the reins at J.C. Penney a year ago, said this was a “tale of two companies,” with the old Penney still struggling and the new stores surpassing his expectations.

Penney made some concessions during the third quarter. Last month it offered a $10 gift coupon, and it recently held “30 percent off” clearance promotions. But Loeb said the company needs to do much more.

Penney said its net loss narrowed to $123 million, or 56 cents per share, in the third quarter from $143 million, or 67 cents per share, a year earlier.

Excluding a gain from the sale of noncore assets and other one-time items, Penney said it lost 93 cents a share.

Sales fell 26.6 percent to $2.93 billion.

Internet sales fell 37.3 percent to $214 million. Many retailers are working to increase their online sales.

“The data says J.C. Penney is not a top destination and is nowhere near becoming a top destination in peak seasonal shopping periods,” Brian Sozzi, chief equities analyst at NBG Productions, said in a research note.

Gross margin fell to 32.5 percent of sales from 37.4 percent a year earlier, hurt by lower-than-expected sales and increased clearance sales.

(Reporting by Phil Wahba in New York; additional reporting by Brad Dorfman in Chicago; Editing by Lisa Von Ahn and John Wallace)

Article source: http://www.nytimes.com/reuters/2012/11/09/business/09reuters-jcpenney-results.html?partner=rss&emc=rss

You’re the Boss Blog: Is It a Mistake to Pick an Employee of the Month?

Thinking Entrepreneur

An owner’s dispatches from the front lines.

I recently met a management consultant and business author who asked me if I had an “employee of the month” program. I said I did, at which point he reprimanded me for the error of my ways. His argument was that it was a waste of time and was actually counterproductive; only one person wins, and the rest are resentful. My managers and I actually considered that before we started the program, but the conversation with the consultant, Aubrey C. Daniels, got me thinking about it again. As I have gotten older, I have become more open-minded about recognizing that my way might not be the best way.

We name an employee of the month in only one of my companies, the custom framing factory, where I have the most employees working together in the same place at the same time. I have about 30 employees at the factory who do everything from making frames and cutting mats to working in shipping and receiving. We have a meeting every Friday morning for 10 to 15 minutes to announce birthdays and anniversaries, review the progress of the week and discuss what is happening in the company. On the first Friday of the month we also give out the employee-of-the-month award.

Here is how it goes. The manager announces the three people who have been nominated and explains why. Typically, the nominees are an employee who was heads-up enough to catch a significant mistake, someone who filled in for a co-worker or supervisor, someone who went beyond the call of duty to get a job done or someone who did an extraordinarily good job on a difficult project.

Then the ceremony begins, and Alex, one of the supervisors, hits the button on the boom box and the “Rocky” theme song comes blasting out: “BUM-bum-bum-BUM-bum,  BUM-bum-bum-BUM-bum.” And the winner is … !

A small Rocky statue is handed to the winner, who also receives a free framing certificate and use of the employee-of-the-month parking space. In addition, a photograph of the winner is taken with the big boss (that would be me) and displayed with the statue in the cafeteria for the month. Everyone applauds. People seem happy, but the question I now ask myself is, Is it all a front? Do the employees really seethe and grumble and leave sad and rejected? I do not want to be naïve or delusional — at least not that delusional. (A little delusion, I’ve found, works for me.)

So I did three things. I asked my managers, I asked a few hourly employees, and I read Mr. Daniels’s book (“Oops: 13 Management Practices That Waste Time and Money”). After what I believe to have been a thorough analysis, I concluded that the program is in fact worth doing. People seem to look forward to it. They say they like it, and I think it helps reinforce the mission of paying attention and trying to operate in a quality-driven, efficient manner. Are my employees just telling me what they think I want to hear? I don’t think so. Two reasons: First, this is not some pet project of mine, and I have made it clear that if people don’t appreciate it, we should stop doing it. Second, my “corporate culture” is very noncorporate. People tell me all of the time if they think there is a problem — even if they think I am the problem.

Even so, can I be sure that no one is resentful that he or she hasn’t won the award? Can I be sure that there are not some employees who really don’t care if they ever win or not? Actually, I wouldn’t be surprised if there are people who feel that way — but I still think that, on balance, the program has a positive impact.

Has everyone won the award? No, but probably 80 percent have. And here is the harsh and nice reality: I do believe that the best employees have won, and I would rather not punish them by trying to avoid bothering others who have never done anything special to be acknowledged.

The final part of my analysis was an attempt to reconcile the consultant’s view with my experience. That was easy. After I read his book, it was obvious why Mr. Daniels had such disdain for employee-of-the-month programs. The examples he cites all have obvious flaws: they aren’t clear about why someone wins or they just give everyone a turn. He offers one example where he asked someone why he or she won, and the employee had no idea.

In those cases I would agree. A bad or meaningless program is worse than no program. But that doesn’t mean that a well-run program can’t have a little magic: “BUM-bum-bum-BUM-bum,  BUM-bum-bum-BUM-bum.”

Besides, who doesn’t love the “Rocky” theme song? O.K., maybe that’s me being delusional again.

Jay Goltz owns five small businesses in Chicago.

Article source: http://boss.blogs.nytimes.com/2012/09/12/is-it-a-mistake-to-pick-an-employee-of-the-month/?partner=rss&emc=rss