JC Penney

Recent Market Activity

The market went overall up on Monday the 22^nd. The Dow Jones Industrial Average went up by 0.14% and the S&P 500 went up by 0.47%. The biggest gainer of the gainer was Netflix that gained 25% and was traded by a price over 200 in after hours trading. The reason for the gain was their positive quarterly result that presented revenue of $1.024 billions and adding more than 3 million stream members raising its subscribers to 36 millions. The JCP moved pretty closely at the same rate as the market and gained 0.28% during the day.

JC Penney

On April 8^th, JC Penney announced that they fired their CEO Ron Johnson after only 17 months of hiring. Ron Johnson replaced Mike Ullman in late 2011 due to somewhat disappointing results in Ullman’s last years as a CEO. Bill Ackman, the largest shareholder in JCP (17.8% of shares) was lobbying strongly for Johnson to replace Ullman. The price of the stock had dropped by 50 since its peak in 2007 during Ullman’s time, which was closely to what the entire market experienced. The main reason for the hiring of Johnson was the 15% drop in sales during 2010. Ron Johnsons hiring brought high expectations with it due to his work at Apple. He is known as the creator of the retail store format and the genius bar at the store. During his time at Apple Inc., he managed to raise more than 1 billion dollars in annual sales after only 2 years at Apple. Johnson managed to change the old way of selling computers towards a more interesting and engaging store that reminds a lot of a playground.

Given JC Penney’s and Mike Ullman’s traditional strategy, Ron Johnson decided to change it dramatically in order improve the company’s sales. Johnson’s main focus was on bringing in new fashionable brands in order to attract new customers. Bringing in new fashionable brands put a stop on deep discounts and low prices that JCP was previously known for. Instead of attracting new customers, JCP lost old existing customers to competitors. It has been said that Johnson tried to change too much and too fast.

As Johnson’s time came to an end on April 8^th, JCP was on the verge to declare bankruptcy. The stock price had fallen by approximately 50% during Johnsons 17 months long tenure. Aside from the stock price falling, hundreds of employees were ousted from their posts during Johnson’s time. In total, JCP suffered a loss of $985 millions during last year.

The recent results of JCP are not giving good projections for the future. For now, Mike Ullman has been rehired as the interim CEO until a more long-term solution is found. Ullman’s first and most important task at JCP is to stabilize the company and try to bring the company back to where it was financially before Johnsons catastrophic time as the CEO. One of the first things Ullman did was to borrow $850 millions to increase their inventory in order meet the growing demand of customers.

Ullman has decided to bring back the old strategy and return to their old habits of having discount coupons in local newspapers.  As of now, the price of the stock has gone somewhat up and there are some signs of the company being stabilized. Even though it looks better for the company there are still plenty that has to be done for JCP to be back at the same level it was before.