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Big dreams, arrogance, infighting, and delusion all collided in the disastrous attempt to fix venerable retail giant J. Penney. The inside story of a...

A well-written report should have a brief introduction, headings or subheadings, and a brief concluding comment. Note that you should use some keywords as headings or subheadings such as "Johnson’s pricing strategy," instead of a sentence or a question. Read and cite article listed above, supplemented with any other articles related to J.C. Penney, and develop a report addressing following issues.

  1. Briefly describe Johnson’s pricing strategy, also providing background on the company and department store industry.
  2. Explain why Johnson’s pricing strategy did not work. Support your position in terms of environmental factors such as economy, the competition, and changing consumer behavior.
  3. What do you think Johnson could have done better? Take into account J.C. Penney's segmentation, positioning, and branding strategies to explain this issue.
  4. Compare J.C. Penney’s current pricing strategy and Johnson’s pricing strategy, based on your research on the most recent situation of J.C. Penney. How do you think J.C. Penney would perform in the next five years? Take into consideration the relationships between pricing and other aspects of the marketing effort such as a change in merchandising, logo, atmospherics, use of celebrity spokespersons, and so on.
Assignment Expectations Regarding Your References and Defense of Your Positions

Write clearly, simply, and logically. Your paper should be 750-1500 words long, excluding title pages and references, but quality of writing is more important than length. Use double-spaced, black Verdana or Times Roman font in 12 pt. type size


Required Reading/Resources

Reingold, J., Jones, M., & Kramer, S. (2014). How to fail in business while really, really trying. Fortune, 169 (5), 80.

Lublin, J. S., & Mattioli, D. (2013, Apr 09). Penney CEO out, old boss back in. Wall Street Journal (Online). Retrieved from ProQuest.

Glazer, E., Lublin, J. S., & Mattioli, D. (2013, Apr 9). Penney backfires on ackman. Wall Street Journal (Online). Retrieved from ProQuest.

D'Innocenzio, A. (2012, January 27). J.C. Penney slashing prices on all merchandise. USA Today. Retrieved from http://www.usatoday.com/money/industries/retail/story/2012-01-25/penneys-price-overhaul/52787388/1

Reingold, J. (2012, March 19). Retail's new radical. Fortune. Retrieved from http://management.fortune.cnn.com/2012/03/07/jc-penney-ron-johnson/

Mattioli, D. (2012, January 26). J.C. Penney chief thinks different. Wall Street Journal.

Mattioli, D. (2012, January 25). How J.C. Penney was minted. Wall Street Journal.

There's a lot going on at J.C. Penney these days. With a new CEO, Penney, confronted with pressing competition up, down, and sideways in the department store wars, is reinventing itself in terms of merchandising, supply, and pricing strategies. Here we will concentrate only on the pricing aspects of these new directions. However, this is ultimately about positioning; trying to find a space that is responsive to potential customers as well as differentiating the Penney brand from Target, Kohl's, Wal-Mart, and Macy's.


Big dreams, arrogance, infghtng, and delusion all collided in The disasTrous a±empT To fx venerable reTail gianT J.C. Penney. ²he inside sTory oF a revoluton derailed. WHEN YOU ³IND A SAVIOR, YOU DON'² QUIBBLE over deTails. So iT was ThaT J.C. Penney, The long- sTagnatng mid-ter deparTmenT sTore chain, announced in June 2011 ThaT iT was hiring Ron Johnson, The man in charge oF Apple's wildly profTable reTail sTores and a STeve Jobs acolyTe whose golden halo also included pasT Triumphs as an executve aT ²argeT. ²he news sparked euphoria, buT conspicuously absenT From The media coverage was any menton oF how Johnson planned To save This FalTering reTailer in a Fading indusTry. ²haT's because There were no plans. His mandaTe could be reduced To a single word: change. WhaT ThaT enTailed could be fgured ouT laTer. ²haT Fall Johnson began unveiling his planned sTraTegy To Penney's board, culminatng in a big presenTaton on Dec. 7. By Then CEO For jusT a monTh, Johnson laid ouT his vision oF a more upscale, more youTh-orienTed Penney, weaned oF iTs addicton To price promotons. Johnson demonsTraTed ThaT he'd learned a Thing or Two abouT sTagecra´ From his legendary Former boss aT Apple. He had commandeered a large basemenT sTudio aT Penney's Plano, ²exas, headquarTers and had workers consTrucT Two rooms. (Johnson wanTed To go FurTher and insTall µoatng sTages in The company caFeTeria, buT The fre marshal nixed The plan.) A´er he had made his presenTaton, The new CEO broughT The direcTors downsTairs To deliver The coup de grâce in The Form oF a sound and lighT show. In The frsT room was The Taped commoton oF shoutng voices and visual noise: a proFusion oF signage, coupons, o¶ers, and clu±er. ²his was The o¶-pu·ng cacophony oF J.C. Penney aT ThaT momenT. Johnson Then ushered The direcTors inTo The nexT room, which was whiTe, TasTeFully ausTere, and had a celestal sereniTy: The new JCP. ³inally Johnson led The board members inTo The caFeTeria, where 5,000 employees, who had been waitng on Their FeeT For hours, greeTed The group wiTh a raucous ovaton. ²hen iT was parTy tme. O¸cially The FeTe was inTended To bid Farewell To Johnson's predecessor, Myron "Mike" Ullman III, buT iT FelT more like an ecsTatc celebraton oF The company's rebirTh. WiTh nary a whisper oF oppositon, The 109-year-old reTailer had decided To abandon noT only iTs sTraTegy oF many decades buT arguably iTs FundamenTal way oF doing business. JusT 16 monThs laTer Johnson was ouT. Penney was hemorrhaging cash; iT losT $1 billion during his one Full year as CEO. ITs shares were hurTling downward. ²he press had Turned againsT him. One oF The Two invesTors who insTalled him had µed. As FasT as They had once anoinTed Johnson a messiah, Penney's direcTors Turned Their backs on him. Since his deparTure The company has behaved as iF Johnson's entre Tenure was a coup raTher Than a sTraTegy blessed by The board. ²he reTailer has renounced his philosophy, resTored Johnson's predecessor, Ullman, as CEO, and reverTed To iTs old ways. IF we're heading For oblivion, The board seems To be saying, leT's aT leasT Try To geT There slowly. Some observers Think bankrupTcy is a possibiliTy, despiTe improved resulTs oF laTe (aT leasT compared wiTh The previous bloodle·ng).
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THIS ERA HAS SEEN some truly epic corporate confagra±ons. There was the precipitous collapse oF Lehman Brothers, which came to symbolize the greed and corrup±on oF Wall Street, and the mul±decade decline and, ²nally, bankruptcy oF General Motors, which seemed to embody the slow death oF American manuFacturing. But For its stomach-churning mix oF earnest ambi±on, arrogance, hope, and delusion—along with a series oF comic and tragic miscues—it's hard to top J.C. Penney. "I came in because they wanted to transForm," the Former CEO told me beFore his Fall. "It wasn't just to compete or improve." (Johnson was interviewed For this ar±cle but declined to be quoted beyond saying, "I do not want to interFere with Penney's a³empts to succeed.") He and his team did indeed transForm Penney—From a sleepy behemoth known For serving the needs oF Middle America into something quite di´erent: an ambi±ous wannabe startup that Fancied itselF cool, with a radical pricing and merchandising model that had never been pulled o´ beFore. The outcome was doubly disastrous: Penney alienated its tradi±onal customers without a³rac±ng new ones. Everyone understands that the Johnson revolu±on ended in catastrophe. But the Full story has never been told. The reality, it turns out, is even worse than many people imagine—and in a Few respects, very di´erent. What Follows is the story oF what actually happened at J.C. Penney, based on months oF interviews with 32 current and Former execu±ves and vendors and more than 20 investors, analysts, and compe±tors. It's a saga with a swirl oF overlapping Forces. It stars a charisma±c leader bent on radical change and Features a Failed a³empt to Apple-ize Penney, a mission that ended up being every bit as crazy as it sounds. There's a board oF directors who some±mes seemed more concerned with what they'd be served For dessert than with the Fate oF the company. Then there's the mistake that cost the company $500 million—and the Fact that Penney actually began retrea±ng From its controversial pricing strategy even beFore Johnson leµ, raising the ques±on oF whether the company can even truly be said to have tried his approach. Throw in a hedge Fund ±tan who always knew be³er—except when he didn't. The result: Billions in revenue were vaporized, and more than 20,000 people—many oF whom embraced the new Penney—lost their jobs, seeming to hasten the decline oF American brick-and-mortar retailing. This is a tale with very Few heroes. INTO THE CUBE THEY CALLED IT A "CLEANSE." On ¶eb. 6, 2012, a clear, acrylic 10-by-10-Foot cube was installed in the area between the two caFeterias in Penney's headquarters. It was a three-dimensional version oF the retailer's new square logo. Johnson told sta´ers that he didn't want to see the old logo anywhere in the building. He thought it would be a useFul ritual to have employees discard symbols oF the stodgy old Penney. In theory, the cube was a giant ±me capsule, and the old Penney would be buried (exactly where, nobody said). In reality, it was a stylized, transparent dumpster. ¶or the next week people lined up to shed the evidence oF Penney's century-old history. Into the cube went T-shirts, mugs, sta±onery, pens, and tote bags. A Few people even dumped the Chairman's Award, the highest honor in the company, a glass plaque bestowed by Former chairman and CEO Ullman on his most valued employees. As sta´ers pitched their corporate junk, they were invited to select a Few
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Before Ron Johnson could reinvent the 20th-century department store, James Cash Penney had to help invent it. And even though their eForts are separated by 110 years, they've got a few tricks in common, including trying to set prices low and hold to them. Mr. Penney founded his eponymous chain of stores in 1902 at age 26. As lore has it, he was a religious man disenchanted by a retail environment overrun by snake-oil salesmen, saloons and murky pricing. Unlike most retailers of the Tme, Mr. Penney priced items low and didn't permit haggling, according to the J.C. Penney Museum. Now, Mr. Johnson, alarmed by J.C. Penney Co.'s heavy reliance on discounTng, is making a similar move to low, steadier prices, beginning in ±ebruary. Born on a farm near Hamilton, Mo., in 1875, Mr. Penney later moved out West on the advice of his doctor, seeking a drier climate. In Wyoming in 1898, he took a part-Tme job as a sales clerk at a store called Golden Rule during the holiday rush and stayed on a²er Christmas. Its credo was "only doing unto others as you would have them do unto you." ³he owners became impressed by his work and made him a partner. Mr. Penney began scouTng locaTons for the small but growing West Coast chain. His ´rst pick was an unlikely locaTon -- Kemmerer, Wy. -- a coal-mining town brimming with saloons and brothels, says Joan Gosnell, an archivist at the J.C. Penney CollecTon at DeGolyer Library at Southern Methodist University . His partners tried to dissuade him, but on the store's ´rst day it brought in $466, a formidable sum for the Tme, Ms. Gosnell says. By 1906, Mr. Penney had bought out his original partners. In 1913, he changed the chain's name to J.C. Penney. Penney's grew to 175 stores in 22 states and registered sales of $14 million in 1917, according to papers compiled by the DeGolyer Library. Penney incorporated in Delaware in 1924. Americans looking for bargains µocked to its stores during the Great Depression. ³he J.C. Penney Museum sTll stands in his hometown of Hamilton, which celebrates Mr. Penney's life each year in June. Says Ms. Gosnell, "He's squeaky clean." Credit: By Dana Ma¶oli
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NEW YORK – J.C. Penney is permanently marking down all of its merchandise by at least 40% so shoppers will no longer have to wait for a sale to get the lowest prices in its stores. By Mark Lennihan, AP Calphalon cookware is displayed at a J.C. Penney store in New York City on Oct. 27, 2011. By Mark Lennihan, AP Calphalon cookware is displayed at a J.C. Penney store in New York City on Oct. 27, 2011. Sponsored Links Penney (JCP) said Wednesday that it is geTng rid of the hundreds of sales it oFers each year in favor of a simpler approach to pricing. On ±eb. 1, the retailer is rolling out a three-²ered strategy that oFers "Every Day" low pricing daily, "Monthly Value" discounts on select merchandise each month and clearance deals called "Best Price" during the ³rst and the third ±riday of each month when many shoppers get paid. ´he plan, the ³rst major move by former Apple execu²ve Ron Johnson since he became Penney's CEO in November, is similar to Wal-Mart Store's (WM´) iconic everyday low pricing strategy. ´he diFerence is that Penney's goal isn't to undercut all compe²tors, but rather to take the guesswork out of shopping by oFering more predictable pricing. Penney's plan comes at a ²me when stores are struggling to wean shoppers oF the pro³t-bus²ng bargains that they have come to expect in a weak economy. ´he move is risky because shoppers who love to bargain hunt may be turned oF by missing the thrill they might get from feeling like they're geTng a deal. "´he big ques²on on investors' minds will be how customers react to a single price point versus a perceived discount under the old strategy," says Ci² Investment Research analyst Deborah L. Weinswig. Here's how Penney's pricing strategy will work:
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— Sale prices become everyday prices. The company will use last year's sales fgures to slash all prices at least 40% or lower than last year's prices. So, a woman's St. John's Bay blouse regularly priced at $14.99 could have the "Every Day" price oF $7. — ±ewer sales. The retailer will pick items to go on sale each month For a "Monthly Value." ±or instance, in ±ebruary, it might be jewelry For Valen²ne's Day and in December it could be Christmas decora²ons. Items that don't sell well go on clearance and will be tagged "Best Price," signaling to customers that it's the lowest price. — New tags. The retailer used to pile s²ckers on price tags to indicate each ²me an item was marked down. Now, when an item gets a new price, it gets a new tag. A red tag indicates an "Every Day" price, a white tag a "Monthly Value" and a blue tag a "Best Price." — Simpler pricing. Penney will use whole fgures when pricing items. You won't see jeans with a price tag oF $19.99, but rather $20. — New adver²sing. There will be an ad that shows shoppers screaming "No" to discounts as they look in their mailboxes, a pile oF coupons and big sales signs. Talk show host Ellen DeGeneres will be the chain's new spokeswoman. A 96-page colorFul catalog that highlights "Monthly Value" items will be mailed each month to 14 million customers, along with other promo²onal e³orts. The new strategy, unveiled at Penney's investor mee²ng Wednesday, comes as the retailer tries to turn around its business. Heavy discoun²ng has hurt the company, which generates an average oF about $200 per square Foot, less than halF the $550 or $600 stores like Victoria's Secret and Lululemon (LULU) generate per square Foot, according to John Bemis, head oF Jones Lang LaSalle 's retail leasing team. Penney has been a laggard among department stores as its core middle-class customers are among the hardest hit by the weak economy. It's also Failed to a´ract a younger, hip customer despite adding brands such as its Mary Kate and Ashley Olsen teen clothing collec²on. Its stores are described by some in the industry as "boring." The pricing strategy caps months oF specula²on about what Penney's Future might look like under the leadership oF Johnson, a Former Target (TGT) execu²ve and the mastermind behind the success at Apple (AAPL) stores. ±or the frst nine months oF fscal 2011, Penney's revenue at stores opened at least a year — an indicator oF a retailer's health — rose 0.9%, while compe²tors like Macy's (M) rose 5.4%, and Kohl's (KSS) was up 1.1%. Penney posted a loss in the third quarter and cut its Fourth-quarter earnings outlook aµer a disappoin²ng holiday season when it had to heavily discount to a´ract consumers. Penney's gross proft margin has shrunk For six straight quarters. Johnson, who joined the company's board in August, has begun to put his stamp on the retailer. He has tapped Former colleagues at Apple and Target to join him at Penney's, including Target's top marke²ng execu²ve Michael ±rancis to be Penney's president. Penney announced in December that homemaker doyenne Martha Stewart (MSO) will develop mini-shops star²ng next year.
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Shortly afer taking the top job at J.C. Penney Co. last Fall, ChieF ExecuTve Ron Johnson signed up For the company's email alerts. He was shocked by what landed in his inbox. ±he Former Apple Inc. retail execuTve was deluged by sales announcements, someTmes two a day. He and his team counted 590 separate sales last year. ±hey didn't bring in shoppers -- Mr. Johnson's team Found the average customer purchased only Four Tmes a year -- but they did crush prices. Alarmingly, he learned nearly three-quarters oF Penney's products sold at discounts oF 50% or more. "I thought to myselF, '±his is desperaTon,'" Mr. Johnson said. Now three months into his job, the new chieF execuTve is hoping to turn things around with a Far- reaching but risky overhaul oF the department store Format in an e²ort to lure consumers back to a chain that's ofen criTcized as dowdy. Mr. Johnson, who won plaudits For reinvenTng the retail experience with Apple stores' clean lines and empty space, laid out an ambiTous plan Wednesday that involves carving stores into a warren oF specialty shops, turning the high-tra³c center selling space into an entertainment and hang-out area, and eschewing constant "sales" in Favor oF lower prices every day. ±he idea is to make stores more inviTng, highlight brand names and gain more control over pricing. "Some may call it crazy, but I don't think there is an alternaTve," Mr. Johnson said in an interview. "In an Internet age where you can have exactly what you want with one keyword, people won't tolerate big stores. You have to break it down For them." But overhauling the chain's ´eet oF 1,100 stores will pose costly challenges, and consumers have been reluctant to spend without the incenTve oF big markdowns. Penney has been baµered in recent years by compeTTon From rivals like Macy's Inc. and Kohl's Corp. Under Former ChieF ExecuTve Myron Ullman, Penney shed its catalog business and invested in exclusive brands and partnerships with hot sellers like Fast-Fashion line Mango and Sephora cosmeTcs. But it conTnued to struggle with lackluster sales and the need to discount heavily to clear merchandise. At an interview at the Plano, ±exas, headquarters last week, Mr. Johnson said he determined that the store's iniTal prices needed to be realigned with what customers Feel comFortable paying. Beginning in ¶ebruary, Penney will lower the iniTal price For items by about 40% From where they start now. He also plans to sharply reduce the number oF promoTons. Penney will pick a number oF in-season items that will be on sale For an enTre month. It will have two clearance sales, on the ·rst and third ¶ridays oF the month, called "Best Price ¶ridays," an idea he picked up while working at Mervyn's, a now-deFunct regional department store. Prices will be expressed in ´at dollar amounts without cents. Penney plans to spend $80 million a month on the program. ±he move is risky, as shoppers have become rabid bargain hunters. But the old strategy wasn't working. Sales at stores open at least a year, a key measure oF a retailer's strength, rose a thin 0.7% in the 11
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months through December, down from a 2.7% increase the year before and well behind Macy's 5.4% gain. A poor holiday showing led Penney to sharply cut its proFt outlook for the fourth quarter. Its shares are up about 6.7% in the past year, but that's compared with Macy's gain of nearly 47%. On Wednesday, Penney's shares fell 1%. Macy's fell 3.1%. Department stores increasingly are seTng up "stores in a store" and carving out areas for speciFc brands. Mr. Johnson, however, wants to set up as many as 100 of them -- including branded spaces like a new Nane±e Lepore shop and "Martha Stewart's Kitchen," private-label stores for the company's Liz Claiborne line, and themed areas for seasons and trends. ²he new CEO also plans to replace the "center core" -- the highest tra³c middle area where stores typically concentrate cosme´cs, accessories and other high-margin impulse buys -- with what he calls "²own Square." ²he sec´on will be a minimum of 10,000 square feet and rotate monthly a±rac´ons and services, such as free back-to-school haircuts or free hot dogs and ice cream in July. Mr. Johnson equates ²own Square with Apple 's "Genius Bar," where customers have their products serviced. "Just like in the Apple store, you have to walk through the products to get to the ²own Square," he says. ²wo things Mr. Johnson isn't interested in are celebrity lines and private-label apparel. Mr. Johnson, a believer in brands, says in-house labels lack dis´nc´veness and pricing power. As a result, Penney is slashing the number of private-label lines it has from hundreds to a few strong ones, Chief Opera´ng O³cer Mike Kramer said. ²he company acknowledges that the changes will require investments, but Mr. Johnson says cost cuTng and the elimina´on of sales have been "engineered to pay for it." "It's going to be funded internally from our own cash µow from opera´ons, but it's going to be on steroids, because we're becoming more e³cient and cuTng out a lot of cost," says Mr. Kramer, whose major task is funding the changes. ¶or instance, Penney will cut the number of promo´onal packs it sends to stores to just one a month from three a week. It also will eliminate jobs related to retagging merchandise for perpetual sales. Mr. Kramer, who reported to Mr. Johnson at Apple , recalls phone conversa´ons the two men had years ago when Mr. Kramer was at the helm of Kellwood Co. , an apparel manufacturer. Mr. Kramer says he'd vent his frustra´ons about working with department stores, and the two would mull ideas for transforming them, Mr. Kramer says. Mr. Johnson says he became intrigued by the decline of department stores during his Apple days, no´ng on mall trips he could park easily near department stores while spots were taken near specialty stores.
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J.C. Penney Co. dumped Ron Johnson, the chief execuTve it poached from Apple Inc. with great fanfare 17 months ago, replacing him midway through a major overhaul of its stores that has produced a disastrous drop in sales. Penney's board met Monday and agreed to part ways with Mr. Johnson. SorTng out whether to press onward or roll back Mr. Johnson's changes will fall to his predecessor, Myron Ullman, who is rejoining the company as CEO. Mr. Johnson's exit will mollify some increasingly impaTent investors and tamp down discontent among some within the company, but it leaves Penney in a tough spot as it is burning through cash and shedding customers. Mr. Ullman faces long odds. Retailers Fght for every percentage point of sales improvement, and few have rebounded from declines as deep as the 25% drop under Mr. Johnson's Frst year at the helm. In a sign of investors' concern, Penney's shares were down more than 10% in ±uesday morning trading. In an interview, Mr. Ullman--who will also get a seat on the board--acknowledged the tough job Penney faces to climb back from the drop in sales and proFtability, but said he has yet to make any decisions about what to keep and what to replace from Mr. Johnson's strategy, including the former CEO's management team. "I wouldn't recommend that we go back to the way J.C. Penney was when I le². ±hings change," he said. But, he added, "±here's no reason to try and alienate customers who want to try and shop at J.C. Penney." Mr. Johnson declined to comment. ±he return of Mr. Ullman, 66 years old, shows the challenge of Flling the top job at the struggling chain. A number of other retail CEOs have said they would have been unwilling to take on the job given the size of the company's problems and constraints on its cash. Penney's largest shareholder, acTvist hedge-fund manager William Ackman, was instrumental in establishing the 56-year-old Mr. Johnson as CEO in place of Mr. Ullman. ±he former CEO's return means Mr. Ackman "now has to eat crow,'' because Mr. Ackman wanted Mr. Ullman to reTre and make way for Mr. Johnson, said Je³rey Sonnenfeld, a senior associate dean at Yale School of Management. "He made a mistake.'' Mr. Ackman didn't immediately respond to requests for comment. Penney hailed Mr. Ullman as an accomplished retail execuTve with proven leadership ability. ±he board's decision ends a brief and turbulent career in the corner o´ce for Mr. Johnson. He arrived at Penney to great fanfare in November 2011, but lost the conFdence of directors and investors a²er he rolled out an ambiTous plan to reinvent Penney's stores without following the usual retail pracTce of tesTng the changes Frst. Sales tanked, with no sign of improvement. In the most recent fourth quarter,
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including the crucial holiday season, sales dropped 28.4%, contribuTng to a net loss of $552 million, the worst of the year. Penney paid heavily to lure Mr. Johnson from Apple , issuing the new CEO about $50 million in stock to make up for equity awards he leF behind at the iPhone maker. But the company isn't obliged to pay him much to leave. Mr. Johnson opted not to enter into a terminaTon pay agreement, according to the company's latest proxy, which says the former CEO would be enTtled only to any unpaid salary and $143,924 from a savings plan and the value of unused vacaTon. In a securiTes ±ling Monday, Penney didn't say whether Mr. Johnson would receive any addiTonal severance pay. Mr. Johnson also holds warrants that enable him to buy nearly 7.3 million shares of Penney's stock. He spent almost $50 million on the warrants, but their exercise price of $29.92 a share is about twice the stock's current level. Mr. Johnson was unapologeTc about his decision not to test his strategy. Asked earlier this year if he would do things di²erently given a chance to start over, he replied, "No, of course not." Penney's revamped stores and new lines of merchandise, such Joe ³resh, won praise from analysts. But shoppers were turned o² by Mr. Johnson's decision to cut back clearance sales and didn't respond when Penney started to reintroduce markdowns last year. Sales fell 25% in the year ended ³eb. 2, depriving Penney of $4.3 billion in revenue and causing analysts to ask whether it might run out of cash needed to fund its overhaul. At Apple , Mr. Johnson won praise for helping create a new and lucraTve style of retail. But the experience didn't translate to Penney's customer base of bargain hunters. Mr. Johnson's fortunes turned a few weeks ago, when the company began looking for management alternaTves, one person familiar with the ma´er said. Mr. Ackman regularly said last year that he was willing to wait for the turnaround to start geµng tracTon. But by last month he was among the board members who were puµng the CEO on a shorter leash, people familiar with the ma´er said at the Tme. Also last month, fellow acTvist Steven Roth's Vornado Realty ¶rust , at the Tme Penney's second-largest shareholder, dumped more than 40% of its stake. At ³riday's close, Penney's shares were down more than 20% so far this year. Messrs. Ackman and Roth have seen their holdings pummeled by the steep slide in the company's shares. ¶he stock closed up 2.7% Monday at $15.87. ¶he two investors disclosed their stakes in the fall of 2010 and built their posiTons at a cost of $25 to $30 a share, according to securiTes ±lings and a person familiar with the ma´er. Some Penney o·cials in recent weeks sounded out execuTves who might be able to take on a senior role at the company, people familiar with the ma´er said. ¶hose execuTves include Vanessa Castagna, a
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About 100 days afer Ron Johnson started as CEO oF J.C. Penney Co., hedge-Fund manager and board member William Ackman put up a slide at an investor conFerence that said: "Ron Johnson's record oF retailing success makes him the ideal leader to ±x JCP." Less than a year later, the Former Apple Inc. retail execuTve is out, sales conTnue to plunge and a new management team is preparing to undo some oF Mr. Johnson's work. Myron "Mike" Ullman, who preceded Mr. Johnson as CEO and then retook the corner o²ce Monday, is likely to return to calling the company J.C. Penney and do away with the newly minted "JCP" brand, people Familiar with the ma³er said. Coupons -- which Mr. Johnson's team had derided as drugs -- are on the way back and should be Fully in place around Mother's Day, one oF the people said. Meanwhile, other Apple veterans at the top oF Penney are likely to Follow Mr. Johnson out the door, people Familiar with the ma³er said. ´he moves are a blow to Mr. Ackman, who set out to change the retailing world by revamping Penney and now is stuck with a large stake in a broken company run by the man he pushed out. Penney's shares dropped another 12% ´uesday, pushing his investment Further underwater. ´he stock closed at $13.93. Mr. Ackman paid around $25 a share to build his stake in the company. Mr. Ackman's Pershing Square Capital Management LP owns 18% oF Penney, as well as derivaTves that Further boost his exposure. ´he hedge Fund manager recruited Mr. Johnson and was a cheerleader For the execuTve's plans to turn Penney's stores into sellers oF name-brand clothes with Few discounts. But conTnuing to support the strategy -- and the CEO -- became untenable in recent weeks, people Familiar with the ma³er said. Penney's same-store sales, which slid throughout last year, are down more than 10% with a month to go in the company's ±scal ±rst quarter, the people said. ´hat is less than the 18.9% drop in the same period last year, but it was troubling nonetheless. Concerns about the Failure to turn around sales were ampli±ed by the Fact that Mr. Johnson never relocated From CaliFornia when he took the job and Frequently wasn't in the trenches at the Plano, ´exas, headquarters, where he worked three days a week, people Familiar with the ma³er said. ´he board's con±dence in Mr. Johnson was already waning. In early March, Steven Roth, a board member and one oF the company's biggest shareholders, sold 40% oF his company's stake in J.C. Penney. ´he sale signaled to Mr. Johnson that the board was growing impaTent with the slide in sales and pro±tability, a person Familiar with the ma³er said. µrom then on, the board began exercising more control over the CEO, the person said. Mr. Johnson o¶ered to resign about two weeks ago, but the board didn't accept it, saying it wanted to meet ±rst, a person Familiar with the ma³er said.
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The change came as the board met Monday without Mr. Johnson in a±endance. Mr. Ullman was lined up by the weekend and told he would likely replace Mr. Johnson this week, people familiar with the ma±er said. Mr. Johnson and a Penney spokeswoman declined to comment. Several of Mr. Johnson's top lieutenants are expected to follow the former CEO. The most vulnerable are Mike Kramer, chief opera²ng oFcer, and Dan Walker, chief talent oFcer, both Apple veterans, people familiar with the ma±er said. The department store chain's chief ³nancial oFcer, Ken Hannah, is expected to stay, the people said. Messrs. Kramer, Walker and Hannah didn't respond to requests for comment. Wrenching changes and layo´s over the past year have hurt morale. While many Penney employees were eager for Mr. Johnson to work his Apple magic, they say the environment soured for legacy Penney employees as Mr. Johnson ³lled out his new team. Many long²me Penney's employees said they felt that the new hires judged them or felt that they weren't smart. Apple references were constant. "If people are saying the culture is becoming much more Apple y," Mr. Kramer said in an interview in January, "I take that as a compliment." Mr. Ackman publicly trumpeted the new team and its strategy while disparaging the old Penney, calling it bloated and mismanaged. In the long slide presenta²on to investors last May, he cri²cized the headquarters for having been oversta´ed with assistants, merchandising sta´ and managers with few reports. By contrast, he lauded Mr. Johnson, saying in early 2012 that the former Apple execu²ve's announcement of his plans for Penney would "be the most important day in retail in the last 25 years." Now, Mr. Ackman is relying on Mr. Ullman to save his investment. The new CEO will have to work fast. Analysts at Credit Suisse said the company has un²l about Memorial Day to ³rm up many of its holiday orders. On Tuesday, credit ra²ngs ³rm Standard & Poor's warned that Penney's cash µow is declining and could force the company to seek fresh funds. --- Karen Talley contributed to this ar²cle. (See related ar²cle: "Corporate News: Retail Industry Short on Stars" -- WSJ April 10, 2013) Subscribe to WSJ: Credit : By Emily Glazer, Joann S. Lublin and Dana Ma¶oli
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Johnson and JC Penny Companies.docx

Running Head: JOHNSON AND J.C PENNY COMPANY PRICING STRATEGY Report: Johnson and J.C. Company pricing strategy
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