Johnson Era is Over: What Will It Take to Fix Penney?

Discussion
Apr 09, 2013
George Anderson

The new boss is exactly the same as the old boss at J.C. Penney.

Yesterday, the department store operator announced that Ron Johnson was out as CEO and his replacement is the man he replaced, Myron "Mike" Ullman.

The news of Mr. Ullman’s return has prompted some head scratching. The Wall Street Journal and New York Times among others questioned the wisdom of bringing Mr. Ullman back.

"Most of the senior employees that he had assembled at Penney either left or were dismissed by Mr. Johnson. And it was dissatisfaction with where Mr. Ullman was taking the company that led Mr. Ackman to look for another leader in the first place," the Times reported.

Skepticism aside, Mr. Ullman is back.

"While J.C. Penney has faced a difficult period, its legacy as a leader in American retailing is an asset that can be built upon and leveraged," said Mr. Ullman in a statement. "To that end, my plan is to immediately engage with the company’s customers, team members, vendors and shareholders, to understand their needs, views and insights. With that knowledge, I will work with the leadership team and the Board to develop and clearly articulate a game plan to establish a foundation for future success."

Bill Ackman, Penney’s largest investor, handpicked Mr. Johnson to replace Mr. Ullman. Speaking last week at a Thomson Reuters investment conference, Mr. Ackman acknowledged that Mr. Johnson had made "big mistakes" bringing Penney "very close to a disaster."

Why do you think J.C. Penney turned to Mike Ullman to run the company again? What will the department store chain need to do to undo the damage done under Ron Johnson? What changes taken under Mr. Johnson should Penney keep in place?

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35 Comments on "Johnson Era is Over: What Will It Take to Fix Penney?"


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Marge Laney
Guest
6 years 11 months ago

The changes Ron Johnson instituted could have worked. He simply should have added people to the store equation rather than subtracting them and focus on better customer experiences. Other apparel retailers have successfully halted the spiral of the never ending discount and replaced it with intelligent fair pricing. But they did it by upping the service ante.

Ron Johnson was known for his invention of the high touch genius bar. Apparel is bought in fitting rooms, and people buy more in well serviced fitting rooms. [Disclaimer: I run a fitting room solutions company.] I expected him to transform the JCP fitting room experience into something really special. Instead he cut store payroll and tried to sell apparel as if it were bought on the sales floor with iPads.

I’m not sure that JCP can be saved, but I do know that adding back associates and focusing on getting the customer into the fitting room and providing a supported fitting room experience will help give it a chance.

Steve Montgomery
Guest
6 years 11 months ago

JCP realized that it needed to make a change right now! That meant it had no time to run an executive search. Not sure why the board didn’t see the cliff the company was headed over and start searching earlier, but that is a story that will likely be told at a later date.

The board realized it needed someone that knew the company, its stores, employees and customers (or at least it former customers). Mike Ullman fits that bill. Will he be there for the longer term? That unknown but JCP needed someone who could hit the ground running and running fast.

JCP may be in a position that it needs to employ the strategy of making friends, and then making money that my first boss taught me. It needs to get traffic back into its locations. Hopefully it has the cash reserves to be able to buy them back.

Paula Rosenblum
Guest
6 years 11 months ago
The quick and snarky answer to “why Mike Ullman?” is “Dinosaur riders are hard to find” but that’s probably lacking in color. JCP is running out of time and cash, so whoever comes in has to hit the ground running and be very efficient about the steps he takes. And snarkiness aside, there really aren’t too many people familiar with what it takes to run a department store chain, since there just aren’t that many department stores of significant size anymore. Any answers to the questions about what to change and what to keep have to be infused with the realization that the company is getting more and more cash starved. So while it would be good to put people back in the stores, the cash situation may not allow it. I don’t know which of the tech decisions that were made have gone too far to be backed out, but I’m quite sure many of the implementations won’t go forward, and I don’t think turning over the staff again is a great idea either.… Read more »
David Biernbaum
Guest
6 years 11 months ago

I’m starting to believe that the success or failure of many retailer CEOs is mostly coincidence and timing. In the case of J.C. Penney, unless a CEO would change the entire format of the store, change the name, and carry all different merchandise laid out in an entirely different way, this is still going to be a struggling retailer because it’s 2013 and the J.C. Penney type of store simply doesn’t work anymore.

Ron Margulis
Guest
6 years 11 months ago

The new logo tells a lot of the JCPenney story under Ron Johnson—a small JCP caught in the corner of a box. Nothing new and engaging for customers, no solid partnerships with vendors (even a potentially litigious one with Martha Stewart) and just awful morale at the store level.

It will take a lot to fix JCP, but it must start and end with the customer. The retailer needs to develop a full, omni-channel picture of the customer and then build narratives that engage them in a series of lifestyle communities. One for teens, one for newlyweds, one urban, etc. They need to become a helpful part of the shopper’s life, not make it harder for them to shop.

One thing I would keep from the Johnson “error” is the move to RFID for inventory management and eventually POS and EAS. Other than that, everything’s got to go.

Dick Seesel
Guest
6 years 11 months ago
Mr. Ackman’s vote of “no confidence” last week signaled that the crisis of operating results at JCP showed no signs of improvement. His fellow board members appeared extraordinarily passive during the past 18 months of Ron Johnson’s stewardship. Selecting Mike Ullman to step in appears at first glance to be an attempt to stop the bleeding and save the company, not another stab at “reinvention.” You can make a case that JCP stores and assortments look crisper and more updated than before, but it’s hard to know whether the new shops (e.g. Joe Fresh) are gaining any traction. But Mr. Ullman (or his eventual successor) has a big task in front of him, starting with the need to drive sales volume. As I’ve pointed out repeatedly, the collapse of JCP’s sales in the last year made the rest of the operating model (margins and profits) unsustainable. Whether Mike Ullman is the right man for the urgent job ahead of him remains to be seen. He is likely to bring some needed stability to the organization… Read more »
Gene Hoffman
Guest
Gene Hoffman
6 years 11 months ago

Ol’ J.C. turned to Mikey because they are desperate, the sky has fallen, too many customers have abandoned ship … and who else of Retail’s Royalty would take that job now?

Like milk that has soured, it is difficult to know how to undo the damage that was done under Ron Johnson.

Johnson’s ideas were good but his timing was too hasty. It takes time to create a Pygmalion, a “My Fair Lady.” In wanting to burn away Penney’s wild personality he became a pyromaniac — and badly burned that dear ol’ Wyoming gent’s legacy.

David Livingston
Guest
6 years 11 months ago

I think Bill Ackman deserves all the blame. First he invested large amounts of money in a dying company. Then he’s hired all the wrong people to run it. We could all suggest the buzz words like better prices, promotions and such, but that’s not going to happen.

Let’s face it, JCP is grandma’s store stuck on the wrong end of the mall and Walmart and Target have given consumers a better alternative. Probably the best thing to happen is have Mr. Ackman accept the fact that it’s all over, and transfer the company over to the retail morticians.

J. Peter Deeb
Guest
6 years 11 months ago

JCP needed to turn to the familiar because with the ship floundering, you need a captain who knows all the systems and can stabilize the boat! The biggest issue now is finding the right strategy and plan to save the company. The old department store model was not working and the latest EDLP and store-within-a-store attempt has been unsuccessful. The new look in the stores and the store-within-a-store concept may be right for the future.

The biggest challenge is winning back all the lost customers and attracting new ones. This will require creative use of digital media, communication with lost customers through purchase history on the Penney’s card and a willingness by the board to invest in impactful promotions to encourage traffic.

Raymond D. Jones
Guest
Raymond D. Jones
6 years 11 months ago

JCP needed to act quickly to survive. They had no time for an extended search and a learning curve. That meant bringing in a leader who could hit the ground running. However, he may be a short-term solution.

Ron Johnson was pursuing a complete transformation of JCP from a discount house to a branded chic shopper experience. This was a laudable goal but extremely difficult and expensive to achieve.

Now they have lost their identity and their loyal customer base. That defines the short-term task for Mr. Ullman. He needs to redefine their position in the marketplace and reengage with their former customer base.

Ed Rosenbaum
Guest
6 years 11 months ago

We have been watching the demise of JCP not only since Mr. Johnson took control, but before when Mr. Ullman held the reins. There are many questions to be answered. Mainly, why did it take the board so long to realize Mr. Johnson was taking them down a slope that was getting slicker by the day? Mr. Ullman now has to prove he can do something he could not do before, bring customers in and make the cash register ring.

This is like going back to the future. I am not optomistic; but neither are those JCP managers and customers who still remain. Having worked for JCP on a resume can not be beneficial or give recruiters “warm fuzzies” about placing candidates who were high on the food chain.

Ryan Mathews
Guest
6 years 11 months ago

Gene Hoffman is—characteristically—right again.

Ullman was picked because in all likelihood, nobody else would have touched the job with a 10,000 foot long golden parachute.

And, if he’s good to his word, he will fail even faster than Johnson. Circling the wagons of the current unsustainable base of customers, vendors, etc. is NOT the right answer to the JCP problem.

In fact, it’s a perfect strategy for failure, i.e., take the minority of customers still willing to trade with you and give them more of what the the majority of shoppers clearly don’t want.

It may sound a tad radical but the current customers may be the problem and maybe the right answer is to “fire” them—an example of what Sol Price once called, “the intelligent loss of business.”

Looking more of the same is only going to yield more of the same. Ullman was failing just fine before Johnson came along and while Johnson didn’t help, “old think” isn’t the answer either.

Doug Fleener
Guest
6 years 11 months ago

Pretty simple on why Mike Ullman is now running the company. Who else would want the job that could actually do it? With that said, can anyone save JCP?

I think it’s easy to bash Ron Johnson, but that ship was taking on water way before he got there. Of course he could have bailed water while testing out the new pumps. The engine room is flooded, cash to fuel the company is drying up, and it is only a matter of time until she sinks.

I sure hope I’m wrong, and I’ll be rooting for Mr. Ullman and the entire JCP team. They’ll need more than that, they’ll need a miracle. Then again, Sears is still in business.

Jason Goldberg
Guest
6 years 11 months ago

So many have written about the “Brilliance of Steve Jobs” and his famous attitude that “it’s not the customers job to tell us what they want,” i.e. specifically citing his reliance on intuition over data or market research. And because that philosophy was so wildly successful at Apple, few asked if Apple’s retail success was a direct result of brilliantly intuitive leaders or if other business factors may have been been more responsible.

It’s now clear that Ron Johnson’s intuition was not solely responsible for the wild success at Apple or the failure at JCP, but it is a cautionary tale.

Intuition does plays a critical role in business success, but it needs to be balanced with great empathy and understanding for the customer (which is often aided by market research and experiments). That customer empathy (developed via research) appears to be what JCP lacked in the Ron Johnson era.

Cathy Hotka
Guest
6 years 11 months ago

Okay, so if you’re Mike Ullman, what do you do? Bring back the clutter? Jack up the prices? Hire some salesladies in their sixties?

The most unfortunate consequence of this may be the message it sends to other retailers: that change is bad, and that putting great looking and inexpensive merchandise in your store is a losing strategy. Go figure.

Lee Kent
Guest
6 years 11 months ago

It’s a big shame to me. I loved where Ron Johnson was headed. He just moved too fast and in the wrong order. If you visit the stores or shop online you do see and feel a new experience that is fun and current. Just the wrong customer.

Not sure Mike can do the job but like everyone else, who would step in now? What JCP needs most right now is a fab turn-around artist!

I almost like the idea of a partnership between Ron and Mike? That could be interesting….

Carol Spieckerman
Guest
6 years 11 months ago

The decision to bring Myron Ullman back to JCP (or will it revert back to J.C. Penney?) feels ditch-to-ditch and regressive. That said, Ullman can’t afford to undertake a massive undoing of the current work in progress including dismantling the brand commitments already made. His best “rallying” work will be done with those new brand partners as they have some real skin in the game. Joe Fresh is a perfect case in point—scrapping plans to build 800 or so stand-alone stores in the U.S. in favor of making a shop-in-shop commitment to JCP was no small shift.

Joel Rubinson
Guest
6 years 11 months ago

It’s the “prepare three envelopes” joke, for real….

Jack Pansegrau
Guest
Jack Pansegrau
6 years 11 months ago

Went to an Apple store last night at Fashion Valley—might be an attractive store with a Genius Bar, BUT the staff spent more time socializing among themselves. What makes the Apple stores thrive is more about incredible products (which is why the Microsoft store a few bays down was empty, even though its appearance was a dead ringer for the Apple store).

In my opinion, Johnson’s “retail successes” at Apple, while impressive, still were possible only because he had the absolutely best, essentially unique Apple product line. JCP never had and likely never will have that sort of product lineup. JCP needs to find a niche appeal that defines it and creates a solid customer base.

I hope JCP survives, just as I hope for Sears. Way too many co-tenancy agreements are in the balance.

Gene Detroyer
Guest
6 years 11 months ago
One of the comments on a financial show this morning was that the Board and Wall Street thought JCP should go back to the familiar. The only problem with that is the familiar will leave JCP with a business model that is obsolete and a market position that familiarly was getting weaker and weaker. Ron Johnson had to go. He was a weak leader. He did recognize that major changes had to be made at JCP and his first efforts probably made sense. But, they had to have time…years, not months to work. Further changing strategy 3 times in 17 months or less is ludicrous. I did find Ullman’s opening remarks humorous. “To that end, my plan is to immediately engage with the company’s customers, team members, vendors and shareholders, to understand their needs, views and insights. With that knowledge, I will work with the leadership team and the Board to develop and clearly articulate a game plan to establish a foundation for future success.” He must have gotten this from the new CEO manual.… Read more »
David Zahn
Guest
6 years 11 months ago

JCP turned to Mike Ullman because they were afraid to continue with Ron Johnson and no hands went up from others to volunteer for the post.

In terms of what they need to do—Ryan’s idea might be the way to success. Identify who your customer is and meet that person(s) wants, needs, jobs, etc. Who is their current shopper? Who is their desired shopper? How can they do a better job of attracting and meeting that person(s) shopping requirements so that JCP is “hired” and products are purchased there.

Easy to do? Not at all. Is there another choice? I guess ask Sears what they think.

In terms of changes to keep—the mobile POS seems to be a keeper of an idea (for the time being it is still somewhat of a differentiator).

vic gallese
Guest
6 years 11 months ago

It almost sounds like an interim role to me. JCP might think about tapping the brakes a little on some of the changes until they are refined in enough pilot stores.

The store-within-the-store concept is a differentiator. The customer still likes to feel they are getting a bargain though, so getting back to meaningful promotions will get the foot traffic back in the stores. Consumers have short memories!

Gordon Arnold
Guest
6 years 11 months ago

J.C. Penney is in serious trouble, that’s for sure. Replacing the guy that made it worse with the guy that got it in trouble makes it clear as to why there are so many problems that can not be solved by executive management. The board of directors is the problem. Turn out the lights, the party’s over…or so the story goes!

Tony Orlando
Guest
6 years 11 months ago

How do you measure up a store ready for the graveyard? JCP had its day, and hasn’t drawn the interest of the new shopper. I don’t see survival, unless something really drastic happens here.

Burning cash in this economy is deadly, and it is going to take a merger, or some huge risk venture capitalist to turn this around, and frankly I don’t see it happening.

Lee Peterson
Guest
6 years 11 months ago

Mistake. Very disappointing that the JCP board would commit to someone like that then not have the patience to see it through. Johnson himself even said last year, “it’s going to get worse before it gets better,” but in the end, like so many short sighted public companies that are doomed to fail, it was near-term thinking that did him in. And IMO, will do them in too.

Ed Dunn
Guest
6 years 11 months ago

The obvious elephant in the room is that the 21st century does not favor large-format retailing and having more than two anchor stores at a shopping mall.

Just like Best Buy, no one person or talent can change market evolution.

Paul R. Schottmiller
Guest
Paul R. Schottmiller
6 years 11 months ago

It may be the case that the board and Ron Johnson had a different expectation of “transformation.”

I am not sure where they go from here. The risk for further confusing past and present customers is certainly high, so a clear communication at the customer level (not Wall Street) is an important step.

Never a dull moment at JCP these days.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
6 years 11 months ago
First I need to set the record straight that I was very excited about Mr. Johnson leading the way at J.C. Penney. That unfortunately did not turn out like I expected. At least I can admit when I am wrong. Not sure that bringing back Mr. Ullman was the best choice, but it may have been the only choice in the short term. Mr. Ullman does know how to operate the old model of J.C. Penny and with a few tweaks it may work out fine. I do not blame Mr. Johnson for trying to build a unique J.C. Penny identity. At the end of the day you need to be known for something. Walmart: Low prices, Target: Fashion at a value. Mr. Johnson tried to build an identity and unfortunately he did it without asking consumers or if he did, he clearly didn’t listen. Mr. Ullman’s first job is to build an identity. It can’t be Low Price or Fashion at a value. Those are taken and to attack either would be a mistake.… Read more »
Bill Emerson
Guest
Bill Emerson
6 years 11 months ago

Ron Johnson did one thing brilliantly while at JCP, namely demonstrate (again) the deadly results of a mix of hubris and impatience. The dumbest thing he did was (according to reports) agree to no severance agreement.

Ullman has a couple of advantages. As a colleague of mine used to say “always look for a disastrous situation, you can only go up.” Secondly, it’s encouraging to hear that Ullman’s first priority is to listen to all the shareholders—customers, associates, and vendors. If nothing else, they’ll certainly find that refreshing. The big challenges, of course, are lack of cash and time, a tough combination.

Craig Sundstrom
Guest
6 years 11 months ago

A number of people here have expressed curious remarks to the effect that they thought Mr. Johnson had the right ideas, but didn’t execute them properly. Isn’t that exactly why someone is paid the big bucks…to execute things properly?

But such is water under the bridge now; or more particularly it’s water in the hold, with just a few inches of freeboard before the ship goes under. Mr. Ullman expressed the hope succinctly, that JCP had sufficient brand equity, and the damage is recent enough, that there is still something left to salvage. Good luck Mike…you’ll need every bit of it.

Mike B
Guest
Mike B
6 years 11 months ago

Recently it dawned on me what Ron was copying for his shops idea: the San Francisco Union Square Macy’s has this very concept at least in the men’s clothing building. Each brand has its own space, flooring, lighting, shelving…

Copying Macy’s and trying to take the home brand from them…ethical? Not.

Jerome Schindler
Guest
6 years 11 months ago

Maybe he was the only one willing to take the job! Hard for me to know the big picture—in the central Ohio area, Kohl’s has numerous convenient locations. JCP is in three shopping centers, one of which is dying. JCP is not at the extremely popular Easton Town Center, the department stores there are Macy’s and Nordstrom (never even been in Nordstrom).

I think I am getting better deals at Kohl’s than at JCP or even Macy’s. Marshalls and TJ Maxx also seem to be doing well. Truth is, we are over retailed and something has to give. It likely will be JCPenney. Sears may not be far behind.

Bill Hanifin
Guest
6 years 11 months ago

Somehow I believe that Johnson must have sold his ideas to a wider group of responsible people within Penney’s, therefore conclude that multiple people missed the boat on the strategy.

That said, it’s the coach of losing teams that take the blame and Mr. Johnson was the one in the spotlight in this case.

To me, it is not difficult for Penney’s to gradually migrate its merchandising strategy back to the original model which has proven to work. People will come back when they see something familiar in the store.

Bob Phibbs
Guest
6 years 11 months ago

The damage to the JCP brand is incalculable at this point—from the operations people who left, killing of the spirit of the brand culture, not just the BILLIONS of sales lost. And all because one investor was able to strong arm a CEO out of a job and put someone else in who apparently didn’t even like the brand to start with—then reverse it 17 months later. No wonder middle America is distrustful of Wall Street. I said it last summer and stick by it. Worst. Makeover. Ever.

Ryan Draper
Guest
Ryan Draper
6 years 10 months ago
Combine too much competition with the Internet and you get what J.C. Penney has. Marketing is only half of their problem. People go back to a store for two reasons—they got a deal there or they absolutely love what they bought the first time. They also need to look at customer service. Macy’s representatives are always there to help if needed. They don’t push, they just ask and it works. My mother used to take me shopping at J.C. Penney because it was close. I walked in there recently and noticed that they had the same layout and the same brands displayed in the same way. That is an epic fail in retail. I once worked at a store and it was a fact that they couldn’t compete in largely populated areas; the popular guys made it too difficult. For that reason, they focused on slightly smaller areas where they could attract a wider variety of customer. Some of their multi-million dollar stores were located in places nobody had ever heard of. That may be… Read more »
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