The company pulled the ad. Department store J. Penney launched a commercial this week expressing remorse for store changes. Penney's new ad, a female voiceover says, "It's no secret, recently JCPenney changed.
Some changes you liked and some you didn't, but what matters from mistakes is what we learn. We learned a very simple thing, to listen to you. The second ad was first developed months ago, before former CEO Ron Johnson was ousted by the board in early April. Penney's sales floundered in the last year after the company used a new "Fair and Square" pricing strategy, cut reliance on coupons, and offered "stores" within the store.
Penney JCP changed. Some changes you liked, and some you didn't," the ad states. The ad goes on to say it listened to what customers want and need. Penney," it urges. Johnson's ambitious changes included getting rid of most sales and bringing in new, hip brands. The strategy was designed to attract younger, wealthier shoppers in a bid to reinvent the stodgy retailer, but it alienated Penney's loyal customers and caused sales to plummet. The TV spot is in contrast with the chain's "fair and square" advertising campaign that accompanied Johnson's revamp.
Those ads were colorful and whimsical and did not give specifics about products. Penney shareholders filed a motion requesting that the bankruptcy court judge appoint an official shareholders' committee.
This would put the company on the hook for covering substantial legal and research fees to fight for shareholders' interests during the bankruptcy proceeding. The general argument in the filing is that J.
Penney is not hopelessly insolvent. If it were, then it would be a foregone conclusion that shareholders would be wiped out. In fact, the shareholders claim that the company is probably worth enough to satisfy all creditors' claims, leaving some value leftover for equity holders. They point to what they describe as better-than-expected financial results over the past few months and the liquidation value of J.
Penney's assets to support their arguments. However, whether or not the shareholders realize it, these claims are built on extremely flimsy evidence. One piece of the shareholders' argument is that J. Yet this estimate relies heavily on rosy projections made by management around the time of the bankruptcy filing. Even J. Penney's leaders don't think revenue growth is feasible. Nevertheless, it projects substantial growth in earnings before interest, taxes, depreciation, and amortization EBITDA , driven by massive cuts to marketing spending, store labor, and overhead, with virtually no incremental investment in IT.
Considering how competitive the retail environment is, cost cuts of this magnitude would almost certainly cause revenue to plunge at a much faster pace. The shareholders group claims that management is actually too pessimistic. They point to better-than-expected financial results since the bankruptcy filing. Furthermore, gross margin improved to However, one month of results is not very meaningful.
Soon after the shareholders filed their motion, J. As a result, while operating income surged year over year in June, it decreased significantly for the full second fiscal quarter. The shareholders also make much of J.
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