The ghost of ex-CEO Ron Johnson's grand plans for JCPenney (NYSE:JCP) still haunts the 1,100-store chain in a very visible way. The new home department in 500 of the retailer's stores is every bit as bright and modern as Johnson intended it to be. Unfortunately, there's no money to make the remaining space in the stores glitzy enough to match, Bloomberg reported on Tuesday (June 4).
As a result, current CEO Mike Ullman is stuck trying to make the beautiful new department look less out of place. That effort has taken the form of scaling back, but not eliminating, some of Johnson's grand design. That village of 100 shops, complete with a Main Street and coffee kiosks? Shrunk down to a few shops. The giant Khaki Bar designed to showcase Haggar and Dockers slacks? Now it's a smaller, more conventional display.
And within the new home departments, the assortment will be tough to reconcile with the rest of JCPenney's offerings. While Ullman has brought back some of the chain's house brands (which Johnson hated, though they generated lots of revenue), housewares is now stocked with $60 Michael Graves toasters and Martha Stewart-designed cupcake liners.
The decision not to proceed with Johnson's vision isn't a matter of merchandising philosophy, though Ullman (who was jettisoned in 2011 to make way for Johnson) clearly doesn't think much of his successor/predecessor's ideas. The coupons and discounting that Johnson got rid of are back in force.
The trouble is that the renovation money has already been spent, and even after Ullman spent his first months back on the job shoring up JCPenney's finances, just finishing up those housewares departments will leave less than 10 percent of the chain's capital-expenditure budget for the year. Even if Johnson hadn't been fired, there'd have been no money to proceed with his plans, which he announced early on would be paid for out of cash flow.
Instead, Ullman has to spend as little as he can to make the fancy home departments stand out a little less—and hope that, if he can get customers to return, they'll buy some of those $60 toasters.
- See this Bloomberg story
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