J.C. Penney’s New Business Plan, Strategy Overhaul

NEW YORK—Department store chain J.C. Penney Co. this week laid out a plan to completely overhaul its strategy in an effort to boost sales and revive its brand.

Starting Feb. 1, the Plano, Texas-based retail chain will introduce a new pricing model, which will decrease the number of sales per year—it usually has several hundred sales promotions—while implementing lower prices overall and a monthly sales calendar.

The restructure will give the retailer a three-tier price model that seeks to lower prices broadly, while introducing one sales promotion per month on seasonal products, which should resonate better with consumers.

In addition, J.C. Penney will overhaul store layouts on a monthly basis, at a cost of $80 million per month, to attract consumers. Its low price strategy doesn’t seek to undercut competition—which is the strategy at Wal-Mart—but offer more predictable and stable prices. The company also recently hired comedian and talk-show host Ellen Degeneres as a spokesperson.

“We are going to rethink every aspect of our business, boldly pursue change, and create long-term shareholder value, as we become America’s favorite store,” said Chief Executive Officer Ron Johnson in a statement. The new strategy is dubbed “Fair and Square Pricing,” and according to the company, would slash prices on almost all merchandise by 40 percent or more.

“These prices will be coupled with a new promotional cadence that is in sync with customers’ lives. Rather than inundating the customer with a relentless series of sales, coupons, rebates, and retail gimmicks, jcpenney will host 12 promotional events each year, on a monthly calendar,” the company said. Johnson was at a press event in New York Wednesday to unveil the new initiative.

J.C. Penney, which has in the past relied heavily on discounts and sales promotions, has trailed its rivals Macy’s Inc. and Kohl’s Corp. in sales per square foot.

Johnson was hired from Apple Inc. to revitalize J.C. Penney’s stature in the industry and the company’s sagging stock price. Johnson was the retail guru behind Apple’s retail strategy, and today the electronics and computer giant boasts the industry’s highest sales per square footage, a common retail industry metric, which measures profitability. Before Apple, Johnson worked at Target Corp.

The strategy shift will correspond to a new advertising campaign and new price stickers on items. In addition, new brand partnerships will ensue, including collaborations with Nanette Lepore and Martha Stewart.

On Thursday, J.C. Penney said that it expects 2012 full-year profit per share to come in at $2.16 per share, which was above analysts’ expectations for the company.

Shares of the company (NYSE: JCP) rallied on Thursday on this week’s news, ending the day higher by $6.44, or 18.8 percent, to finished at $40.72.