Fake Discounts at JC Penney? Apple Guy Must be Getting Nervous
Even as sales fall into the cellar, JC Penney (JCP) Chief Executive Ron Johnson insists -- publicly, at least -- that customers will return once they realize they’re getting a fair deal from the retailer’s “everyday low prices.”
Privately, though, Johnson is playing a different game, according to the New York Post, which reported Thursday that Johnson is pressuring manufacturers to concoct fake “suggested retail prices.” The report quotes sources explaining that Penney wants to price its merchandise below the fake markups to pretend shoppers are getting a bargain.
Johnson, who earned a reputation as a retail genius while running Apple (AAPL) stores, knows enough to ask manufacturers to put the phony prices in writing, the Post story says. Otherwise, JC Penney could be hit by fines for false-pricing claims. But, not surprisingly, manufacturers are balking.
This behind-the-scenes arm-twisting comes from the same CEO who promised to wean customers off coupons and criticized rivals such as Kohl’s (KSS) and Macy’s (M) for their constant sales. Apparently, Johnson doesn’t really believe the strategy he touts to investors. His new plan is to out-fake the fakers. That could make investors who bought into his vision for JC Penney -- including those who scooped up shares as a value play -- awfully nervous. A stock chart since the announcement of Johnson's hiring at Penney shows the plunge.
Taking away customers’ discounts messes with their shopping hormones and drives them into the arms of competitors, as we explained in this YCharts story. Penney’s revenue per share has been cliff-diving since Johnson got rid of discounting, while Macy’s and, especially, Kohl’s are showing steady gains.
Meanwhile, JC Penney activist investor Bill Ackman told CNBC that if Johnson can’t revive Penney in the next three years, he’s probably the “wrong guy” for the job. Three years is an eternity in the lifespan of a retailer. Many investors won’t wait that long.
Amy Merrick, a contributing editor at YCharts, is a former staff reporter for the Wall Street Journal, where she spent 11 years writing about the Midwest economy, state and municipal finances, and the retail and banking industries. Her work has been published in the Poynter Institute’s Best Newspaper Writing series. She can be reached at email@example.com.