JC Penney CEO on Company Transformation

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Insight on the lessons learned from his work at Apple are being applied to his new role at J.C. Penney, with Ron Johnson, J.C. Penney incoming CEO, who discusses the retailer’s new look to revive its brand.

Video and text below:


here first on the street, ron johnson the ceo of jc it’s great to be here. walk me through a little of the strategy that you unveiledthis morning. and specifically, you know, when we see ceos hop from one company to another, they usually loathe to talk about their experiences at a prior company. you’re invoking the apple name to a surprising degree today. why? well, i learned so much at apple. i had a wonderful time in the past decade at apple. as we really built the company from a mac to be the most popular consumer electronics company in the world and i was so excited to see the results they announced yesterday.and it’s just such a part of my history. and i think so much of what we believe as people is informed by our past. and so i’m honored to have worked at apple, but today i’m most excited about what we’re going to do at jc penney in the years ahead.an apple fan would say, that makes sense. but apple’s success is based around a product. and we — one could argue we’rehearing you talk more about marketing and pricing than we are product today. yeah. well, today what we anounsed and it’s important, on february 1st, jc penney’s going to introduce an all-new pricing strategy that customers are going to love. and it’s called fair and square. and so instead of an endless series of promotions and rebates and retail gimmick, we’re going to price products exactly where the customer likes to buy. and we’ll have three types of prices. every day prices, which are really great, we’ll take some items and put them on value for the entire month. and so the customer can shop on her time and not ours. and when it’s time to make room for your stuff. we think customers are going to like it. and so the focus on pricing andpromotion are because they’re the first key steps in thetransformation. ultimately, it’ll be about product and presentation, the things that the customer walks out of the store with. but i think you should be pretty delighted the start of nextweek. you know, ron, if you look at great corporate turn arounds and apples, as well. you had a plan today, you put that plan in place. but typically, the plan that you announced today, you’re going to have to adjust, make some changes. when you think about the next three to five years, the plan you laid out today, how different will it be as a result of what you see after you’vestarted to execute on it? oh, it’ll change — it’ll evolve pretty dramatically. but every journey, the key is the first step. and you’ve got to make sure you’re on the right path. and then you learn every step along the way. and one step informs the next.like at the apple fair, nobody came for the first year and a half.we believed in the idea. and today they’re really popular. and the same thing will happen at jc penney. we’re going to be really good next week, but we’re going to get a little better month bymonth and pretty soon the momentum will kick in, and wehopefully will become america’s fair store. favorite store. let’s take the pricing strategy announced today as a possible example. you wouldn’t rule out the idea that six months from now, you come back, you revisit certain aspects of that and remember this is working, and this is not working. and as a result, we’re going to possibly have certain pricing strategies for certain skus and others for others. it would seem given what you did at apple, that would probably be the blueprint. that’s just not going to happen. i slightly disagree. our pricing strategy is set for the long run. customers like — and they know the right price. we believe in pricing goods right. we might have some merchandise we change the price on to make sure it’s to the point where it can maximize velocity. but the pricing strategy ofbeing fair and square of having a great price plus month-longvalues, that’s going to happen forever. ron, how do you respond to macy’s? and the idea that you have wrongly stolen martha?you know, i have really no comment. but obviously we did a lot of due diligence before, you know, martha stewart and jc penney established a partnership. and we’re working really hard to create that martha stewart store we’ll put inside jc penney next year, february 2013. martha and ellen degeneresnow, two different audiences? or do they both lead you to acertain consumer that we’re trying to identify now? well, you know, i really believe that jc penney should be a big tent. you know, a store can be for all types of customers. rich and poor, you know, rural, suburban, young and old. and we want to reach out to everybody. martha is the authority for home and has been for the past 20 years. and so we’re going to do really interesting things for customers in our martha stewart store inside jc penney. ellen degeneres is really one of our favorite people.she’s funny, she’s witty, but the most important thing, she has exceptional integrity. and we’re going to be founding our company really back on the golden rule where we started, which is treating others like we like to be treated ourselves. and there’s nobody that americans will trust more today in my opinion than ellen degeneres. and it’s a bonus that one of herfirst jobs was at a jc penney store in louisiana. in louisiana where she’s from? yeah. well, she grew up outside of neworleans and worked at the netery mall, and in many ways, she’sjust coming back to jc penney. and that’s one of the reasons ilove being at jc penney, it’s part of the fabric of america. so many of us have stories with our mom or grandma in jc penney.i can’t wait to see what happens over the next two years as werethink literally everything to make a better experience forcustomers. people who look at your retail experience at apple might obviously think of a genius bar. what does a genius bar look like at penney’s? or will there be one? i think there’ll be something equally as profound. in the long run, the entire jcpenney store will move from being a lot of racks to a series of shops. and four years from now, every store will have about 100 unique distinct shops. and we think customers will prefer to shop that way. we’re going to add a new feature to the show called town square. and introduce all of these interesting services that customers will like to use before they buy, while they buy, and after they buy. and this town square’s going to be really big. it’ll be the size of about four big factory stores in the mall. it’ll be the size of about four big factory stores in the mall.it’ll make shopping fun again. and we’re not going to give a lot of the details, but like the genius bar, it’s going to be the secret sauce. and i believe when you look back ten years down the road, we will have found a way to integrate the digital and physical world in a way that the physical retail store retains a position as a center piece of american retailing. and we’ve got to create that kind of experience. not giving a lot of details, you sound like an apple alum already. you’re walking into this jobwith a fair amount of good will even though sales per squarefoot lag rivals like kohl’s, trailing of macy’s, leaving a lot of people to believe stock is giving you the benefit of the doubt, but perhaps a bit ahead of itself. how do you counter thatargument? you know, i just look at — you know, everything we’re going to do is going to be in the long-term interest of ourshareholders. every decision we make will be long-term economic values. you know, i joined target, the stock was $2.50 a share, working with that great target team as we became target at about $40 a share. that’s a long-term economic story.when i joined apple, the stock was split adjusted $12 a share,today close to probably $450. i don’t worry about the price today, i worry about the price over the long run. and as long as you focus on doing the right thing, on good economic value of customers and good economic value for shareholders, the stock price will move. short-term, it is what it is. you sound like you’re going to bring a degree of the — forgive me for calling it this. the apple stubbornness in dealing with the street, indealing with the sell side and dealing with even investors tosome degree. i think that not understood. tomorrow we’re having our actual real analyst day where we’ll spend time in the morning right here talking about the economic impact. what’s it going to cost? what kind of returns will there be? we’re going to talk about the transformation. and you’re going to find that weare going to be exceptionally transparent beyond what you’dexpect because i think investors deserve to know that. they need to understand how we’re going to measure success. they need to have regular updates on how we see it so they can make good investment decisions. we’re going to talk about thattomorrow. ron, appreciate your time. we’ve got a lot of peoplewatching to see how this development unfolds. thanks for being with us. thanks for seeing me today. bye-bye.

H/T: Value Investing World

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