Johnson: J.C. Penney Needs to Improve Communication of Pricing Strategy

Ron Johnson

Ron Johnson

NEW YORK-J.C. Penney must do a better job in communicating its new pricing strategy to shoppers, CEO Ron Johnson told financial analysts at yesterday’s Piper Jaffray Consumer Conference.

In his presentation, Johnson said one way to increase consumers’ understanding of the new pricing strategy was to change some of the verbiage behind it. He said J.C. Penney would switch from calling its newly established 12 monthly events “month-long values” to “sales.” This element of the strategy is an effort by the department-store retailer to decrease expenses by slashing its 590 annual sales events to one for each month of the year.

The new pricing strategy, which also includes what Johnson called “great everyday pricing” and the lowest prices on certain products on the first and third Fridays of each month, went into effect on Feb. 1. “Everything we’ve done has not been perfect,” Johnson told the audience at the conference. “We haven’t communicated the pricing change in a way the customer understands. It takes time for people to understand the pricing change, and it’s been harder than we expected.”

Johnson also said J.C. Penney’s sales since the changes went into effect have been “a little tougher than we thought.” For the first quarter, the company reported that sales dropped 20.1 percent, with a same-store sales decline of 18.9 percent. Johnson said, “We believe that there will be one year of sales going down that will set the stage for a takeoff, with very significant growth over time with a much better profit model.”

On the positive side, Johnson said J.C. Penney is “very excited” about the changes coming to the home department. Referring to the retailer’s partnership with Martha Stewart, he said Stewart has already designed 3,000 items for J.C. Penney. He added that Michael Graves, another new partnership, has designed 190 SKUs set to launch next year, and cited other new partnerships with Terence Conran, Bodum and Jonathan Adler. “By March 1 (of next year), we will deliver an entirely new home department,” he said.

Evaluating how the changes are working for J.C. Penney to date, Johnson said, “The stores are cleaner, the employees are delivering better customer service and the overall value delivered is higher. We like the progress we’ve made.”