Yahoo! Finance ran an interesting list today featuring a rogues’ gallery of hated companies. The usual suspects are well-represented here – mobile phone companies, TV service providers, airlines, banks – but I was really surprised to see JC Penney on the list.
It really doesn’t surprise me that JC Penney is doing poorly; a couple of years ago, they announced their plan to completely alter their pricing in their stores eliminate sales and decimals so that consumers could find simple, low prices on mid-level quality goods. It was certainly a bold choice, but also, in my estimation, a fairly stupid one that dismissed years of consistent research data suggesting that deep discounts (even from artificially high prices) and frequent sales are more enticing to consumers than everyday low prices. (Even Walmart, which specializes in everyday low prices, has sales, “rollback” prices and other indications of deep discounting.)
Here’s what Yahoo! has to say on the matter:
J.C. Penney went from being a mediocre national retailer with modest challenges to one of the great public company management disasters of the last few years. Former Apple retail chief Ron Johnson joined as CEO in November 2011, and promptly decided to radically change the chain’s pricing policy. The negative reaction was immediate. Sales fell 20% in the first full quarter after Johnson began to implement his plans, and the company continued to lose sales at a rapid rate. Customers defected in droves as a sign of their dissatisfaction with the new retail model laid out by Johnson. And with its stock falling more than 40% since Johnson joined, shareholder are also livid with the company, which has also completely eliminated its dividend. Durban Capital’s retail analyst Steve Kernkraut recently said, “It’s been a disaster, and it probably will continue to be a disaster. They’ve made every misstep you could imagine.”
It’s sad to see an old, established brand like JC Penney wasting away so shamefully — it’s almost like watching an elderly person being robbed by a younger relative who’s got access to the checkbook and who keeps covering up self-indulgent spending with crazy lies and nonsensical strategies.
I should add that none of the other major department store chains are faring any better. Sears Holdings (which just lost its CEO) is struggling to stay relevant and is shuttering K-Mart stores all over the country to try to keep its entire operation from going under. Macy’s just closed several high-profile stores, and while it’s opening some new ones, the company isn’t performing at a strong level and was recently downgraded along with Penney’s and Kohl’s.
Still, Penney’s seems to be the poster child for poor decisions. It’s going to make a great case study in a business school textbook one day (along with other recent boom-to-bust companies like Blockbuster, Best Buy and, well, just about all of the 10 Most Hated Companies Yahoo! references), but it’ll still be sad to see it go.