Penney resurrects the word 'sale' in advertising
Tuesday, June 5, 2012
NEW YORK (AP) — J.C. Penney Co.'s new CEO Ron Johnson told analysts Tuesday the department store chain is resurrecting the word "sale" in promoting its monthlong events, the latest change it's making to reverse a sharp drop in customer counts and sales.
Investors were spooked even more, driving shares down 4 percent Tuesday. That extended a decline seen since early February when analysts starting becoming bearish about the new pricing plan that went into effect at the start of that month.
Penney has been getting rid of hundreds of sales events from last year in favor of a three-tier pricing plan that offers everyday prices, which are 40 percent lower than a year ago; monthlong discounts on select items; and Best Fridays, which are clearance events.
But Penney, which is trying to wean shoppers off discounts and focus on merchandise, had been avoiding the use of the word "sale" to describe the monthlong events and instead had called them "monthlong values" in its marketing campaigns. That ended up confusing shoppers.
"Everything we've done hasn't been perfect ... We haven't communicated our pricing change in a way that customers understand yet," Johnson said in an address to investors at the Piper Jaffray Consumer Conference, which was webcast. "It's just been kind of confusing."
He added, "So we're moving away from the word 'monthlong value' because no one really understood ... what we intend to do. It's a sale."
The move marks the latest changes Penney is making to bring shoppers back after an abysmal quarter.
The department store chain, based in Plano, Texas, is adding five "Best Price Friday" sales throughout the year, which would be in addition to the sales it has on the first and third Friday of every month, according to Charles Grom, a Deutsche Bank analyst in an analyst note published last week.
The first took place this past Memorial Day weekend and another is planned for Black Friday in November, Grom said. Daphne Avila, a Penney spokeswoman, declined to give details on the additional events or when they would be held for competitive reasons.
The company is tweaking its advertising to better educate shoppers on the three-tier pricing plan.
Penney reported last month a bigger-than-expected loss for the first quarter. Revenue also dropped 20 percent for the quarter as customer traffic slipped 10 percent. Meanwhile, revenue at stores open at least a year — a comparison used to measure a retailer's health — fell 18.9 percent. That's much steeper than the 11.4 percent drop Wall Street was expecting.
Shares fell $1.00 to close at $24.27 on Tuesday. After Johnson laid out his vision for the new pricing strategy to analysts at the end of January, shares soared, peaking at $43.13 on Feb. 9. But they have since lost more than 40 percent of their value.
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