JCPenney is expected to spend more than $1 billion in the first quarter as it tries to execute the turnaround strategy of failed CEO
Ron Johnson. The investments are going toward building shop-in-shops, rolling out a collaboration with Joe Fresh, and setting up the retailer’s new home goods shops, reports Evan Clark at Women’s Wear Daily.
Ron Johnson, the Apple visionary who had a disastrous 16 months on the job at JCPenney, enacted a vigorous turnaround plan which included remodeling hundreds of stores.
While new CEO Mike Ullman plans to bring back the promotions that Johnson ditched, he is basically forced to finish the shop-and-shops — small boutiques that would showcase designers and give JCPenney a modern feel — that are already under construction.
Retail analysts agreed that JCPenney needed to look more modern, but execution has proven to be difficult and expensive.
The shop-in-shops might not even generate that much revenue for JCPenney, activist investor Bill Ackman said on CNBC in January.
“The problem with the vision is it’s a small percentage of the store, which is the so-called ‘shop’ strategy,” said Ackman. “It’s 10-11% of the square footage.”
JCPenney’s execution of the strategy has also been plagued by alleged building permit problems.
The company lost $1 billion last year alone as sales plunged.
If the company burned through cash at the rate of the last 12 months, it would be broke by summer, said Brian Sozzi, chief equities strategist at Belus Capital.
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