APFormer JCPenney CEO Ron Johnson is finally out after months of criticism and plunging same-store sales. Its “shares are down 51 per cent and the company’s market cap has fallen $6.84 billion to $3.49 billion,” reports CNBC.
Johnson was considered a visionary at Apple, but critics said his aggressive turnaround strategy — inspired by his work with Steve Jobs — just didn’t work for JCPenney. He tried to upscale the brand, initially eliminating discounts and creating partnerships with major brands like Joe Fresh and Martha Stewart. But somehow everything backfired.
Although there are ways Johnson could have handled the turnaround more smoothly, in other ways he added value and has changed the company for the better.
Fund manager Bill Ackman, Johnson’s most ardent supporter until last Friday, layed out several reasons he was bullish on JCPenney in a big presentation last May, including:
*realising that competing on price was a losing strategy. Although Johnson brought back coupons to JCP, there’s no proof that this was the right one. To upscale a brand the way Johnson planned to do, you need to compete in ways other than price.
*Upgrading the store’s look and feel. Before Johnson joined the company, JCP was known as a frumpy retail store with an unpleasant shopping experience. Johnson improved the store’s image by creating the in-store shops and boutique model.
*Creating partnerships with major labels. Johnson brought on big names like Martha Stewart, Nanette Lepore and Joe Fresh, its last life line. Although the Stewart deal turned into a big fiasco since Stewart violated an agreement with Macy’s, Johnson still brought more brand power to JCP by negotiating these deals with high-end labels.
*He created a more efficient cost structure. Although he received a ton of criticism for massive layoffs, there was also inherent value in streamlining operations by letting go of dead-weigh management.
Ultimately, Johnson was already dealing with a sinking ship, and at the mercy of Wall Street shareholders. Turnarounds take time — and Johnson wasn’t given enough.
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