PLANO, Tex. — J.C. Penney Co. Inc. is going to be “in the wilderness” for about a year as it reinvents its identity in a bid to capture market share, chief executive officer Ron Johnson told shareholders at the company’s annual meeting here Friday.
“We are in the middle of a very important and a very challenging year of transformation,” he told the small audience at company headquarters. “It is not easy. It’s been a really hard time for all of us here.”
Certainly Johnson is the first ceo in Penney history to appear before shareholders in a checked shirt and gray jeans, and his relaxed style indicates yet another era for the 110-year-old retailer, which has seen its shares pummeled after reporting a $163 million loss for the first quarter.
The retail maverick still talked heritage, framing the company’s fledgling everyday pricing as a return to founder James Cash Penney’s insistence on charging the “right price.” “We moved through a period where we marked our products up only to mark them down and sell them at a perceived discount,” Johnson explained in a quick review of company history.
“It’s a really popular thing with a lot of our competitors but, from my perspective and that of our leadership team, this was not a great era for our company,” he said. “We had massive losses in market share, we kind of moved into a position where there were a lot of people with similar merchandise, and during that time, especially the last two-thirds of that, our stock price did not appreciate.”
A Penney retiree pointed out during the question-and-answer period that the stock fell significantly over the last five years, and dividends were suspended even as the company doled out a hefty severance to former ceo Myron E. “Mike” Ullman 3rd, who received total compensation of $34.6 million last year, including stock and option awards.
“What did you learn from him that was worth $40-plus million?” the shareholder asked.
“Mike did an extraordinary job of educating me on the company and introducing me to people around the world,” Johnson replied. “We traveled together to Europe, to Asia, to New York multiple times. He walked me through exactly how this company works sitting through the various committee meetings and the process that we use. And I found that actually quite invaluable.”
Regarding the elimination of the firm’s quarterly dividend, Johnson acknowledged it was a “very difficult decision for shareholders,” but he insisted it was the right move.
“We really believe we have a lot of ways to use our capital to provide extraordinary growth for this company,” he said. “We’re excited about seeing appreciation of the stock price, and you can hold me and my team accountable for that.”
Penney has only about 3 percent of market share, Johnson said, so it has to break through to the 97 percent who don’t think of the retailer first.
“We’re rethinking everything,” he noted. “From a marketing perspective we’re looking at the personality of the brand, pricing strategy, promotional strategy, the products we carry, how we present merchandise and ultimately the store design itself,” he said. “For us to succeed we’ve got to be the best at all of these.”
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