THE RON JOHNSON DISASTER TIMELINE: How The Apple Guru Failed At JCPenney

ron johnson jcpenneyJ.C. Penney CEO Ron Johnson.

JCPenney CEO Ron Johnson is out of the company, according to CNBC, after just 17 months on the job.

His Q4 2012 was probably the worst quarterly performance ever in the history of major retail: same-store sales were down 32 per cent, to $3.8 billion.

By late February, the stock was down 46 per cent on the year. It jumped more than 10 per cent today on the news of Johnson’s departure.

There are rumours of impending mass layoffs at the chain. (And with a sales decline like that, how could there not be layoffs?)

Johnson, the former retail boss at Apple, only became CEO of the department store chain in November 2011. But this week we learned retail insiders were taking bets on when he would leave, and private equity groups were plotting takeover strategies.

Here’s how it got so bad, so fast.

Johnson inherits a company that didn't notice a looming cotton crisis.

The company did well in 2010 (increasing profit 36 per cent over the year prior). But the cotton market wreaked havoc on the clothing industry in 2011. Flooding and other shortages caused cotton prices to hit an all-time high. Rather than staying conservative with expectations, J.C. Penny raised its earnings expectations at the beginning of the year, as if cotton prices weren't an issue.

Nonetheless, by the end of Q4 2011, sales at JCP were still at $5.4 billion.

November 2011: Ron Johnson arrives and is warmly welcomed.

Then, JCPenney announced Ron Johnson, the man at the helm of Apple retail through the company's epic rise, would be taking over as CEO in November. Stock surged on the announcement and speculation was rampant about what the former Apple guru would bring to JCP. Johnson was formerly a vice president at Target and was lauded for his retail genius.

The stock hit a high of $42.68 in February of 2012.

At the end of 2011, JCP fired its longtime ad agency.

Ad agency Saatchi & Saatchi and JCPenney 'mutually decided' to part ways after five years in December of last year. It came only a few weeks after PMK-BNC was brought into replace M Booth & Associates, the company's PR agency for the last six years.

In January, Johnson lays out his vision with a Steve Jobs-esque keynote.

Johnson got to witness the master of keynotes -- Steve Jobs -- work many times during his tenure in Cupertino, Calif. In January, he held an Apple-style conference that made it clear: JCP was going to try to be like Apple.

The key takeaways:

  • JCPenney ran 590 promotions in 2011, consumers ignored 99 per cent of them. As such, Johnson only wants 12 promotions.
  • Sales were removed in favour of regular pricing with the best prices offered the first and third Fridays of each month.
  • Rather than one big store, Johnson wants brands to have smaller shops within JCPenney locations, a Genius Bar type concept will be placed in the middle.

And he introduced a new logo.

Johnson showed off the new logo during his keynote, it was the third logo in three years. The new logo captured JCP's newly-launched 'fair and square' pricing strategy fairly well, but it didn't make customers want to adopt the pricing model any quicker.

In April, JCP laid off 10 per cent of its corporate staff.

Johnson hoped to save $200 million by firing 600 of JC Penney's 5,900 employees at its sprawling Plano, Texas, headquarters. It was described as a streamlining effort and couldn't have helped morale going into what would be a disastrous May.

Including all its top execs.

The speed at which Johnson replaced nearly all of the company's top executives was remarkable. It created a situation that makes it impossible for Johnson to avoid credit or blame.

And then it axed 'thousands' of middle managers.

Even now, it's unclear how much of middle management was fired in early May, but one source told us 'thousands.'

The JCP PR team was once again explaining the importance of long-term goals, while the mood amongst the retail staff was grim. JCP ended commissions for its sales staff.

One employee described how things went down:

'One hundred store managers across the country were quietly laid off two days before they announced the home office reductions and the call centre closing. The rest, phase two, happened Monday. They said it was done purely on year-end appraisal ratings, but someone in my store got a higher rating than I did (and was laid off anyway), and also they changed what the ratings stood for this year, and eliminated performance improvement documentation, so that they did not have to wait longer to do this. If my name or even state comes out I will lose my severance.'

Macy's reaped the benefits of the mess at JCP.

When Johnson announced his master plan for the company's success, at the top of the list was controlling marketshare. Unfortunately, despite positive surveys regarding the changes, its customers left for Macy's.

Profits at Macy's were up 38 per cent in Q1 2012. Macy's chief Terry Lundgren was confident enough about how bad things were at JCP that he told Women's Wear Daily that market share was going to continue to increase.

5/16/12: WORST DAY EVER (until Q4 2012).

Here's how the collapse started. Q1 numbers were a big miss:

  • Sales of $3.15 billion, missing expectations by $250 million

It didn't take too long after the announcement for the stock to plummet. It dropped 19.7 per cent in a single day, leading many to describe it as the company's worst day ever.

In June, 'sale' was brought back.

JCP admitted that 'month long savings' was not an effective replacement for 'sale.' So, after only a few months, it brought back the word 'sale' in its marketing.

An analyst for CITI claimed 2/3 of JCPenney's customers did not understand its new pricing system.

But the customers are continuing to shop elsewhere.

Morgan Stanley put out a report indicating the constant rebranding of JCP is driving its core customers away.

Speculation begins on Johnson's job.

Q1 2012 sales at JCP were down 20 per cent from the year before. It closed five of its 1,100 stores in Q1, after axing seven the year before. And still same-store sales were down. The stock is down 30 per cent.

More senior management disappears.

Michael Francis, president of JCP, announced his resignation on June 18, 2012. Francis was hired by Johnson during JCP's c-suite overhaul. He goes to the Gap.

In February, Reuters reports that at least one Wall Street analyst wants Johnson gone.

He was given six months to fix the stock price -- which is down 64 per cent, to just over $15 -- or he would lose his job.

March 2013: Johnson is stuck in an embarrassing lawsuit with Martha Stewart.

Johnson tempted Stewart to do a licensing deal with JCP even though she already had an agreement with arch-rival Macy's.

Whatever the legal outcome, it's clear that Johnson knew it would cause conflict with Macy's. He made headlines by being forced to read his own emails on the stand.

Today, he lost his job.

Mike Ullman will replace him as CEO.

Johnson couldn't turn it around ...

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