The Big Problem At J.C. Penney Is Lack Of Tech Strategy

Aug.10.12 | About: J.C. Penney (JCP)

So far CEO Ron Johnson's tenure at J.C. Penney (NYSE:JCP) can be summed up in one word.

Fail. The company reports a loss of $147 million, 67 cents per share, for its most recent quarter. Analysts had been expecting a loss of 25 cents.

Even now, the former Apple Store wizard is focused more on store design than in getting people into the store. If a mannequin falls on the floor and no one hears it, Ron, it makes no sound.

Penney bulls are now calling for the stock to trade at $29, which looks great from the current $21 but a huge fall from the $43 highs of February.

Johnson has been trying to buck up people by showing his complete re-design, dubbed The Street. (Yes, he's naming the store for a financial Web site.) It features coffee bars and iPads with Internet access.

What it doesn't feature is a clue about how upscale shoppers buy today.

First, most Penney shoppers have their own iPads, or at least Android phones. Johnson is completely missing that a better Internet experience is the key to competing in today's brick-and-mortar world.

That means an app that lets people create shopping lists for things like Christmas and back-to-school, that makes purchasing suggestions based on the age, sex and interests of the people you're buying for, that can have your packages waiting for you when you walk in, and maybe the right combination of cream and sugar in that coffee.

Or how about some social media action? Find out what your friends like or tell them what you've just bought. How about making a game of working your shopping list, and making comparisons between the all-in pricing of a Penney's order and the all-in pricing of one from Amazon?

When it comes to technology, which is what Johnson was assumed to be giving the company, all I hear are the sound of crickets. I'm not even hearing anything special coming from the back room, like improved sourcing and stocking levels based on what's moving in each particular store. From what I've seen Johnson is planning a cookie cutter approach in a world of mass customization.

In short, Penney under Johnson lacks any kind of tech strategy. He's partying like it's 1979, like shoppers have all the time in the world to pick at piles of merchandise. Some do. But they're the people without much money to spend.

To my mind Penney is moving from a sell to a short.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.