Despite condemning markdowns and coupons as addictive drugs, JCPenney CEO Ron Johnson is backtracking. He can’t get shoppers to shake their nasty habit. (Andrew Cowie / Barcroft Media)
He tried to make them go to rehab, but they said, “No, no, no.”
JCPenney CEO Ron Johnson is giving shoppers a little taste of the discounting that he abruptly yanked away this spring — despite having likened coupons and clearance events to an addictive “drug.”
The former Apple exec, scrambling to satisfy bargain-obsessed consumers — and Penney stockholders who have seen their shares fall by 35 percent since discounting stopped Feb. 1 — has mapped out a new strategy to stage five clearance events this year that were previously unplanned.
The added promotions include a post-Thanksgiving “Black Friday” sale, according to Deutsche Bank analyst Charles Grom.
PREVIOUSLY: JCPENNEY CEO RON JOHNSON SAYS STORE WON’T OPEN EARLY ON THANKSGIVING
The move breaks with Johnson’s earlier pledge to go cold turkey on clearances, limiting them to regular, twice-a-month markdowns under the retailer’s new “Fair and Square” pricing plan, which also includes everyday low prices and monthly specials.
“We have made the decision to change our pricing strategy, and we’re going to stick to it,” Johnson said in January.
The 52-year-old retail chief, however, fell off the wagon this past weekend, when he staged a previously unplanned Memorial Day sale.
The flip-flop is “an admission that the company’s existing three-tiered pricing strategy has flaws,” according to Grom.
The aging department-store chain, which put Johnson at its helm last November, shocked investors this month with a heart-stopping 19 percent sales drop at stores open a year or more, which contributed to a yawning $163 million loss.
Penney shares plunged 20 percent on the news — their biggest one-day drop in more than three decades. High-profile investors including hedge-fund tycoon Bill Ackman were hit with embarrassing paper losses.
This week, Ackman said he thinks Penney’s sales have hit “the bottom.”
In a May 15 presentation for Wall Street analysts in New York, top execs admitted that Penney’s coupon clampdown had spurred a 10 percent drop in customer traffic — the biggest reason sales fell off a cliff.
“We did not realize how deep some of our customers were into this,” operating chief Mike Kramer said of coupon clipping, playing on the drug theme. “We’ve got to wean them off this and educate our consumers.”
Last month, Penney launched a “Do the math” TV campaign in an effort to show that its prices, while no longer marked down, were nevertheless lower than before.
But the supposedly simplified pricing plan continues to confuse shoppers, who still appear to be unsure whether they’re getting a good deal, notes Carol Levenson of research firm Gimme Credit.
“Penney is using a new retailing vocabulary but not providing a translation,” she said.
Shares fell 3.5 percent yesterday to $27.02; they are down 23 percent year to date.
Shifts away from discounting to stable pricing nearly always backfire for retailers, says Kurt Jetta, CEO of TABS Group, a consumer research firm. Kmart cut back on coupon circulars in 2001, with then-CEO Chuck Conaway likening them to a “heroin needle.” Kmart filed for bankruptcy in 2002.
“They’re delusional,” Jetta said of Penney. “They’re not all that much different from other retailers that have had this problem before. They just have a much higher level of hubris about it.”