J.C. Penney reversal on sales moves Wall St., amazes Main St.
When J.C. Penney on Monday announced plans to bring back sales, the news raised eyebrows across the retail industry, Wall Street and Main Street.
Critics say that J.C. Penney’s plans to resume holiday-related promotions and add comparative-pricing tags to store merchandise is just a form of backpedaling on last year’s strategic overhaul which comprised an everyday, low-pricing model.
Investors on Wall Street, however, took notice after the company’s stock price rallied over 10 percent during the week that the news was announced. Overall, JC Penny stock has increased its value by 30 percent since its low a few months ago.
Investors are watching the potential for J.C. Penney stock to be a bargain buy at a $21 level if the share price was to pull back to the $18 to $19 range. They are also watching closely for an improvement in sales trends with the return-to-sale strategy.
A few strategic moves are still very much in play, something that has piqued the interest of the retail industry, especially if dumping the old for the new does stabilize the company.
First, timing is everything: Overhauling sales strategies during the slowest retail months offers promise to gain customers back when they decide to open their wallets again during retail- and seasonal-shopping events.
The company, through multiple sources, has maintained that the old pricing models were “confusing to customers” and implied that adding back a couponing strategy will help customers take advantage of low prices.
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.
Analysts favor the potential of “The Shops” model, where the department store dedicates floor space to selling well-known brands.
Despite a customer’s previous confusion over coupons and discounts, retail experts point out that customers can still shop popular brands like Levi’s, Liz Claiborne and Carter and compare prices.
CEO Ron Johnson told The Associated Press last week 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.