This J.C. Penny Turnaround Simply Isn't Working.
CEO Mike Ullman announced that Black Friday sales were off to a "strong start" but the National Retail Federation said that Black Friday sales were down 11% from last year.
At this point in the turnaround, J.C. Penney should be reporting same store sales comps in the mid to high single digits. J.C. Penney comps were flat in Q3.
J.C. Penney continues to struggle as consumers prefer to spend their money on electronics and gadgets like the iPhone 6, tablets and TVs.
It has been three years since Ron Johnson was ushered in as CEO of J.C. Penney (NYSE:JCP). His store-within-a-store concept combined with the elimination of sale prices was supposed to be the start of a turnaround that brought the retailer out of the doldrums and back to the halcyon days of profitability. Unfortunately, the subsequent years have been marked with declining sales, strategy reversals, layoffs and huge losses to the bottom line. After three years, it's time to finally admit that JC Penney's turnaround plan isn't working.
CEO Mike Ullman announced on Black Friday that sales were off to a "strong start" pushing the stock price above the $8 mark. A few days later, the National Retail Federation announced that Black Friday sales dropped 11% compared to last year and things have been downhill from there. With retailers starting the holiday shopping season earlier and earlier, year-over-year Black Friday sales may not be a perfect apples to apples comparison but the numbers suggest that the strong start may not have been so strong after all.
And it's right now that J.C. Penney needs to start delivering some real sales growth. Many quarters into this turnaround and the company should be turning in some solid year-over-year sales growth numbers. J.C. Penney in the third quarter was projecting just 2% sales growth and couldn't even hit that number. Flat same store sales comps just isn't indicative of any kind of meaningful recovery. A successful turnaround strategy should be seeing 6% growth or more at this point.
Part of the reason for J.C. Penney's struggles is the same issue that retailers have seen for the last several holidays. They just don't offer the hot products for the season. Shoppers are out looking for electronics and gadgets and tablets and such. The launch of Apple's (NASDAQ:AAPL) iPhone 6 undoubtedly took dollars away from retailers and as retailer inventories start building and the markdowns begin. J.C. Penney has done a reasonable job of moving sale and clearance merchandise out of the stores but it can't just keep rebuilding inventory.
The other issue is that J.C. Penney hasn't really done anything to differentiate itself from competitors like Kohl's (NYSE:KSS) and Macy's (NYSE:M). The store within a store concept has a unique feel to it but it hasn't proven to be a factor that moves the needle and drive customers away from competitors. In the end, it has to put a desirable product on the shelves.
JCP Liquidation Projected Q2 2016
