JC Penney shoppers don't buy retail revamp; sales slump
"Sales and profitability have been tougher than anticipated during the first 13 weeks," JCPenney CEO Ron Johnson said after sales slumped 20 percent during its first quarter after launching a turnaround effort.
NEW YORK — Turns out, JC Penney shoppers don't prefer predictable pricing over blockbuster bargains — at least not yet.
The department-store chain on Tuesday reported a larger-than-expected first-quarter loss largely because customers were turned off by the retailer's new plan to get rid of big sales throughout the year in favor of everyday low pricing.
The idea of the strategy, which was rolled out Feb. 1, is to discourage shoppers from waiting for the nearly 600 sales Penney used to offer each year. But the move has backfired: It seems many faithful Penney customers have stopped shopping altogether.
The department-store chain led by Apple's former stores chief Ron Johnson said it will discontinue its quarterly dividend after sales fell more than anticipated. The shares declined.
The loss of $163 million, or 75 cents a share, compared with profit of $64 million, or 28 cents, a year earlier, the Plano, Texas-based company said Tuesday in a statement. Sales slumped 20 percent to $3.15 billion, missing the $3.43 billion average of 16 estimates compiled by Bloomberg.
The lackluster reception to Penney's new pricing strategy underscores how difficult it is for a company to change the way consumers behave.
"Consumers want deals, and they're willing to wait for them," said C. Britt Beemer, chairman of America's Research Group, a consumer-research firm. "When you train customers to shop at big discounts, that customer is not going to change."
The first hint that Penney's new pricing plan wasn't resonating with customers came last week when Macy's CFO Karen Hoguet told analysts that sales were rising at Macy's locations that share the same mall as Penney stores.
JCPenney shares fell nearly 13 percent in after-hours trading.
"Sales and profitability have been tougher than anticipated during the first 13 weeks," Johnson said in the statement.
The company said discontinuing the 20 cent-a-share quarterly dividend will result in cash savings of about $175 million on an annual basis.
Compiled from The Associated Press and Bloomberg News