J.C. Penney comeback tested after 2012 losses, slumping sales
The ambitious overhaul of J.C. Penney set in motion by CEO Ron Johnson took a hit this week when the company reported that sales and customer traffic in stores and online were below expectations during 2012.
Despite a robust transformation plan and strategy to eliminate sales and coupons, J.C. Penney reported on Wednesday a net loss of $985 million in fiscal 2012, a sharp decline when compared with last year’s loss of $152 million.
Johnson remained upbeat despite the disappointing numbers, praising the “great strides we made to improve J.C. Penney’s cost structure, technology platforms and the overall customer experience.”
“We have accomplished so much in the last twelve months,” Johnson said in a company statement. “We believe the bold actions taken in 2012 will materially improve the company’s long-term growth and profitability.”
Last year, J.C. Penney’s adjusted net loss for the year comes to $766 million minus the $298 million the company spent on transition costs associated with Johnson’s strategic realignment plan including markdowns from inventory realignment, workforce restructuring charges, pension-related expenses and the liquidation of non-operating assets.
For the year, J.C. Penny spent $78 million to update store fixtures, $41 million in management transition costs, $109 million for home office and store upgrades, $36 million for technological enhancements, $19 million on shifts to the supply chain and another $15 million for miscellaneous costs labeled as “other.”
When J.C. Penney announced last month plans to bring back sales, the news raised eyebrows across the retail industry, Wall Street and Main Street.
Industry analysts say the first quarter of 2013 was the perfect time to make a strategic change, especially during the slowest months for retail sales, but caution that J.C. Penney could also be eying further layoffs in an effort to cut costs while working turning around its business model.
While plans for layoffs have not been announced, J.C. Penney did cut its workforce by 3,100 workers between the spring and summer of 2012.
CEO Ron Johnson told The Associated Press in January that the latest moves are an “evolution” of his strategy first implemented after taking over in November 2011.
“I still believe that the customer knows the right price, but they want help,” Johnson said.