Ken Segall’s Post-Mortem of Johnson’s JC Penny Plan

April 17th, 2013

Ken Segall wrote an excellent analysis of Ron Johnson’s tenure at JC Penny:

In my opinion, there is one very simple reason. I don’t mean to minimize it, because it’s a horrific miscalculation, and I can understand why Ron would be dismissed because of it:

Ron failed because he changed the prices long before he could visibly change the stores.

He did a basic cleanup of the selling environment (eliminated junk and switched to whole-number pricing). Then, before he could widen the appeal of jcp, he took away the one thing traditional customers were hanging onto: sales and coupons.

Sounds right to me: when sales drop 25 percent and you put in a $552m net loss in the fourth quarter, it’s hard to recover.

In his last episode of the Talk Show with Michael Lopp at the Úll Conference, John Gruber compared Johnson’s taking over of JC Penny to Jobs’s return to Apple in 1997, saying that Jobs received a lot of time to work. He’s right, but the comparison is flawed; Apple made a profit in the first quarter of 1998 of $47 million after dramatically reducing operating expenses. That quarter certainly wasn’t a success, but they turned a small profit after losing $120 million in the year-ago quarter. JC Penny, on the other hand, has seen a scary erosion in sales and income.

Jobs wasn’t given carte blanche to do whatever he wanted without consequences; rather, he stabilized the company’s position while making serious changes. Segall is arguing that Johnson failed to do that. His plan may have been sound, but he further destabilized the company before he could make his vision a reality.