Wall Street is starting to worry that J.C. Penney Co. Inc. is falling off the promotional wagon.
Shares of the company retreated 5.7 percent to $24.01 Wednesday after Deutsche Bank analyst Charles Grom said a recent promotional offer for 30 percent off all clearance goods might undermine the company’s two-tier pricing strategy.
Chief executive officer Ron Johnson swore off promotional sales when he laid out his vision for the company in January. But the transition to a simpler pricing system without coupons has been a hard one. Comparable-store sales fell 20.3 percent in the first half and Johnson raised eyebrows last month by offering shoppers $10 off a purchase as a “gift” and an incentive to draw consumers to the revamped stores.
On Sunday, the company sent out an e-mail advertising 30 percent off all clearance items, Grom said. The discount is available to store and online shoppers through Saturday.
“On the heels of a $10 in-store coupon provided earlier [in October], free haircuts for kids and free family photos to begin later this week, we believe JCP is backtracking on its no-promotion strategy, confusing customers, and we, therefore, remain skeptical of near-term improvement in business trends,” Grom said.
The analyst said the promotion could also indicate that Penney’s inventory levels “may be in poor shape relative to sales.”
A spokeswoman for J.C. Penney said: “We are not changing our pricing strategy. [J.C. Penney] still has two kinds of pricing: everyday low prices and clearance. We utilized a temporary percentage-off clearance, as is common in the industry, to help reduce inventory levels at the end of the season. Percentage-off clearance is a way for retailers to take deeper price reductions on clearance merchandise without having to incur the labor or expense to mark down each individual item of merchandise across the store.”
The spokeswoman said the 30 percent off on clearance goods would help prepare the stores for the holiday season.
“We continue to stand behind selling great product at everyday low prices,” she said. “Then, when it’s time to make room for fresh new merchandise, we clear through the older merchandise to make room for new.”
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