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The discounts seem to be back in full swing and once-removed merchandises are re-shelved, but not all customers have shown up after the latest changes by J.C. Penney (NYSE:JCP). During its earlier experiment with the shop-in-store concept, the company raised prices and started stocking more flashy merchandises. Such brand-remaking attempts actually pushed many customers away from J.C. Penney, traditionally a family store. As a result, revenues have declined continually. If old discounts and familiar merchandises can't seem to bring customers back, what other marketing efforts could J.C. Penney make to stage an eventual comeback?

J.C. Penney recently hired a new marketing chief, Debra Berman, an former marketing executive at Kraft Foods, to help revive the brand. Given J.C. Penney's current struggle to attract customers, the lead marketing position has got to be something paramount for the company right now. Upon the announcement, however, investors showed little enthusiasm, with the shares actually trading down. Apparently, investors are having difficulties making the link between food branding and promoting a department store. One would think that with cross-the-board discounts and made-available traditional merchandises as a given policy again, someone with a retail experience in clothing or cosmetics would come in handy for J.C. Penney.

It may take a boost of shopping spirit to get customers back in the stores, when the usually irresistible discounts and desirable merchandises aren't really take care of the sales. So what could possibly strike a chord with J.C. Penney customers who were emotionally let down earlier by the company? Think of something that can generate some sort of cheers or a buzz to draw customer attention and make them feeling good about the company again. If J.C. Penney wants to move quickly, say, its clothing inventory, which happens to make up a large part of its sales, take a cue from cosmetics selling, seemingly always a bustling activity at any store. Free cosmetics try-on assisted by in-store makeup specialists attracts traffic and makes buying cosmetics an engaging and welcome experience for customers.

To promote its apparel sales and help stage a comeback, J.C. Penney may have to consider literally staging some shows inside its stores to put on display the clothing it has. They need not to be of the caliber of glamorous runway fashion shows. Having models to casually display different lines of its clothing would seem enough to give viewing customers a vivid sense of what wearing a particular dress themselves may feel like. Such shows may well lure customers back to the stores, one thing that J.C. Penney hasn't been able to achieve. After customers feel the connection and like the company again, sales will pick up over time, assuming that J.C. Penney can well manage its merchandise quality and pricing.

This could be a turnaround opportunity for J.C. Penney before someone else jumps on similar ideas. But the timing doesn't seem perfect as staging such shows can be expensive and the company currently is short on cash, thanks to earlier wasteful spending on hiring all the executives who were not up to the task. But absent finding a way to increase revenue and generate positive operating cash flows, the company's cash holdings will continue to dwindle. Even though the company has been trying to secure loans and make sure of access to revolving credit facilities, such efforts won't help improve its fundamental business and may only prolong its operational struggle and eventually deplete whatever cash on hand.

The problem with driving changes in companies is that while shareholders have to rely on competent management and the board, managers and directors don't always deliver. In the case of J.C. Penney, some messages of change have been brought to the attention of the company by activist investor Bill Ackman, also the company's largest shareholder. But given that he has advised the failed hiring of Ron Johnson, can investors still trust him in making new changes at J.C. Penney now that he's advocating for installing another new CEO? To be fair about his proposal, interim CEO Myron Ullman hasn't really focused on addressing strategic business issues facing the company. Instead, he's been busy mounting mostly financing maneuvers, beneficial at best to short-term survivals.

In the long run, J.C. Penney shouldn't underperform if it can correct its operation issues. The company's total debt-to-assets ratio is currently below 40 percent and its long-term debt-to-equity stands at exactly one-to-one, posting little danger of over leveraging, always a drag for troubled companies. As long as J.C. Penney can manage to pay its short-term bills on time, which all seems likely because of the recent shoring up of its financing, with effective marketing and customers back in the stores, the stock won't continue to trade below its equity book value as it is now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: J.C. Penney May Have To Stage An Expensive Comeback