Upward or Downward Consumer Confidence in JC Penny
Since the removal of Ron Johnson from the hardworking director's team of JC Penney, there has been much bantering about whether the new CEO will do the job right. Since taking office, Myron Ullman is yet to prove himself in the eyes of his superior, fellow directors, management team, staff and the public. So far, all eyes are on JC Penney. One of the main concerns for everyone is whether consumer confidence will boost or plummet.
In the past, JC Penney has withered storms such as recessions, inflations, price hikes and infrastructure changes. Will this time be any different? Will the recent booting of Ron Johnson cause a significant decline in sales or a significant upward trend in profits?
So far, there are a number of shoppers thinking that the move is a good one mainly because of the direction they saw Ron Johnson heading with the company. Still, the greater majority of people is sticking on the wait and see list.
In the first quarter of 2012, the company came to a low profit margin of 32%. After the CEO shakeup in the organization, stocks went down by almost 70%. Though this was alarming, many onlookers did not see a financial meltdown coming. After all, JC Penney was and still is one of the largest household names in the United States.
A major blunder of Ron Johnson after taking over as CEO of the company in a short while was to attempt to buy Martha Stewart's brand by trying to broker a deal of $200mm in merchandise while dangling $38.5 million to earn a piece of Macy's. Maybe the intention was to force a takeover of Macy's, who knows? The plan did not work and Johnson found himself and JC Penney facing possible collateral damage mainly because Martha Stewart's brand depended heavily on Macy's as well as Macy depending on the brand to keep their profit margin moving ahead. Any loss of the Martha Stewart's brand would see a significant decline in Macy's profits. As for the Stewart brand, in 2012 profit stood at $1,360,000.00. Merchandising, publishing and broadcasting was breaking even. As said, the brand has its main profit source coming from Macy's.
While at Apple, Johnson made some achievements. Some onlookers are wondering if it was because he had Steve Jobs as a business partner and maybe a mentor as well. Who knows, maybe it was because he also had unlimited cash to utilize. Still, he did shine at Apple and got things right on his resume. However, at JC Penney, the situation was not the same. There were new strategies to form and not to mention that he did not have Steve Jobs anymore to call on for his expert advice.
Consumer confidence in JC Penney is at an all-time low. Customers blame one reason for this due to the way Johnson treated staff members. A number of them were sent packing and many others who did not get booted walked away from the giant store. This action caused some friction with employees' family members and friends. As a result, they stopped shopping at the Penney's stores across the United States.
Consumer confidence is low also because according to some customers Johnson had taken on a gay attitude and tried to lead JC Penney in the path he has chosen. In recent times, there were some gay ads that many people became concerned about. This was all Johnson's doing and eventually some persons from the public gave outcry.
The price hikes was another problem for shoppers to contend with. They left JC Penney in multitudes going instead to Macy, Kohl and other retail stores. The company did not capitalize on the rich customers who did not see spending dollars as a problem. Lack of customers cause stocks to plummet.
Should existing stockholders sell their stocks or should they wait and see if Ullman will succeed in turning things around? This is the question many investors are asking after the sacking of Johnson and the decline of customers at JC Penney. According to one expert, "This is a time to rebalance portfolios."
Since stocks at JC Penney plummet, stags may see this as a time to get in on the action. Buy stocks at low price and wait around for that same stock price to rise. This is the way stags work and they are good at it. Other investors are thinking the same thing as well. After all, if JC Penney should succeed in a successful turnaround, the only way stocks would go is up. This would make everyone who buys stocks in the company while it was down come out richer.
However, for now, stocks are limping and no one is sure what the future holds for the company. Recently, the company has acquired US$850 million to be invested in restocking and other things necessary for growth. There is also talk of the company selling some of its real estate holdings to acquire funds.
Will another retail store such as Macy or Kohl attempt a takeover? No one knows for sure, but if there is a takeover being planned by either of these companies, there is not much JC Penney can do about it. In fact, such a move may be the best thing for the retail store at this time, or else they will have to face bankruptcy and close their doors to the public.
For now though, most investors are refusing to buy company stocks on the grounds that they are afraid of losing their hard earned cash. This feeling is even echoed among stags in the market.
If Ullman and his fellow directors can turn to the United States government for a bale out, things would work much better for the organization. However, things might not work this way anymore since a bale out was a thing of the past.
Recently, Ullman made a public apology and literally begged shoppers to return to the retail store. Such a move will not woo shoppers back no matter how convincing he might sound. What shoppers are looking for is change in prices, customer treatment, atrocious gay ads banned and so on.
To boost consumer confidence once more in the retail store, Ullman will have to show to the public some vital signs of taking the company out of the rut. His main focus will be on figures, unlike Johnson whose expertise lies in creativity. Can Ullman make the big comeback for JC Penney? This is a question everyone is asking and no one can be sure until they see what the future holds. Only time will tell now; however, time is fast running out for the giant retail store.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.