Here’s a Really Dumb Idea – Take Your Successful Business Identity and Change It

J. C. Penney Becomes JCP – WHO?

The most valuable asset for many American businesses is their name.  Coca Cola is one great example, Microsoft another (ok in some computer geek communities it is a minus) and Gilette is still another.  Whether you go there or not, when people say the word Sears everyone knows what they are talking about.

But some people are not smart enough know this, or think they are smarter than decades of marketing success.  J. C. Penney is one.  It is a company with over a century of recognition, it has established itself as a mid-priced purveyor of reasonable quality goods and everyone knows their name.  So recently the company decided it would market itself as JCP, which sounds like an oil drilling company.  Results have not been good.

For the quarter ended Oct. 27, Penney on Friday reported a loss of $123 million, or 56 cents a share, versus a year-ago loss of $143 million, or 67 cents. The latest quarter included $34 million in restructuring and management-transition charges. Excluding one-time items, the adjusted loss was 93 cents, compared with a year-ago profit of 18 cents. Total sales declined 27% to $2.93 billion.

Analysts polled by Thomson Reuters projected a per-share loss of seven cents on revenue of $3.27 billion.

Same-store sales slid 26%, while Internet sales fell 37% to $214 million.

Gross margin narrowed to 32.5% from 37.4%. Restructuring and management-transition expenses fell 87% to $34 million.

But of course the name of a business is less important than its pricing and marketing.  We repeat, results have not been good.

J.C. Penney is in the midst of a transformation effort to make it more competitive with competitors like Macy's Inc.  and Kohl's Corp.  The retailer in August reported swinging to a second-quarter loss as sliding same-store sales squeezed margins and raised questions about Chief Executive Ron Johnson's everyday-low-pricing strategy. But Mr. Johnson vowed to "stay the course" at the time and last month said he believes the retailer will not only get back customers it has lost, but add new ones as its vision to be a revolutionary retailer crystallizes. However, Mr. Johnson in September said the second half of the year likely would be "very similar" to the first.

Analysts at Deutsche Bank  recently called Penney's no-promotion pricing strategy confusing to customers, noting that the company advertised 30% off clearance items in an email last month. Deutsche Bank also pointed to a recent in-store $10 coupon, free haircuts for kids and an offer for free family photos throughout November, saying Penney is "backtracking on its no promotion strategy, confusing customers, and we, therefore, remain skeptical of near-term improvement in business trends."

So what can everyone expect for the future.  Well the strategy might work, but morel likely ultimately Mr. Johnson will resign, and having presided over the near demise of an American icon he will be sent on his way with about $50 million severance and the heartfelt thanks of everyone.