Ever since J.C. Penney’s new CEO, Ron Johnson, announced his new strategies for reviving its business in January, those who follow the department store have suffered many cases of the jitters.
The latest fit of nerves occurred last week, when online news reports yelped that J.C. Penney said its new pricing and the reformatting its stores around shop concepts “could hurt sales for some time,” and there was no guarantee that its strategies would work.
The stories referred to a paragraph in J.C. Penney’s 10-K filing, which included the following: “There is no assurance that we will be able to successfully implement these strategic initiatives, which may result in an adverse impact on our business and financial results. In addition, the changes to our pricing strategies announced in January 2012 could result in a prolonged decline in sales.”
Now, before J.C. Penney vendors and shareholders prepare to swallow their ever-ready cyanide pills, and before the investment community makes Johnson walk the plank, a couple of things should be noted. First, the above comments appeared in the 10-K’s “Risk Factors” section. Every quarterly or annual filing with the U.S. Securities and Exchange Commission has this section, detailing the events—an economic downturn, the loss of a large customer, the departure of a key executive, for example—that could hurt the company’s business.
Second, it should be said that J.C. Penney began implementing its new strategies on Feb. 1, just two months ago. Two months is nowhere near enough time to gauge whether these moves, which won’t be fully in place until 2015, will ultimately turn J.C. Penney around.
The knee jerks are not all on the negative side of this issue. On Friday, Citigroup came out with the results of its survey of J.C. Penney customers, getting their reaction to the changes already in place. Based on the survey results, the financial firm said the retailer “has the right strategy long term.”
And what were these findings? Twenty-six percent of the shoppers said the new pricing model would lead them to shop more at the store, while 8 percent said it would lead them to shop less. A third of the customers weren’t aware of the change.
So how can anyone decide that J.C. Penney’s strategies are right based on the favorable reaction of a quarter of the respondents of a survey—especially when an even larger percentage of respondents didn’t even know anything had changed?
The U.S. economy, the investment community and the pundits in particular, are oversoaked in the culture of “we want to see whether a long-term strategy will work yesterday.” The problem is that you won’t see if J.C. Penney’s new look will be a winner or a loser until many months, perhaps even years, have passed.
In the meantime, the business world and the investor pundits will have to do something they hate to do: Wait.—David Gill