J.C. Penney (JCP) is banking on a key architect of Apple's (AAPL) winning retail formula to work his magic on the department store chain.
The investment community has cheered the appointment of Ron Johnson, who has been credited with the success of the Apple Store -- a darling of the retail sector -- as CEO of the $17.8 billion chain come November.
Johnson, senior vice president of retail at Apple, will succeed Myron "Mike" Ullman, who will remain with the company as executive chairman for a three-month transition period to end Feb. 1.
Johnson might just be what J.C. Penney needs to breathe new life into the chain, analysts said.
Although J.C. Penney has pulled off a notable revamp over the past decade, shedding much of its dowdy image with the introduction of trendy, exclusive product lines such as MNG from Mango, the hip fast-fashion chain, as well as in-store Sephora cosmetics shops, store sales have lagged as the recessionary climate continues to put pressure on the budgets of its core, middle-income shoppers.
At the same time, department stores Macy's (M) and Kohl's (KSS), which have also been aggressively rolling out exclusive merchandise lines, have outperformed J.C. Penney, Craig Johnson, president of retail consultancy Customer Growth Partners, told DailyFinance.
Although Ullman should get ample credit for redefining J.C. Penney over the last six years, "The brand remains dated," he says. "They have to really reinvent it and make it a tomorrow brand instead of a yesterday brand."
And Johnson has the right stuff to transform the retailer, Ullman says. "He brings three major ingredients to the table: customer experience, branding [expertise] and innovation. Those three things are exactly what the doctor ordered to rejuvenate and reinvent the J.C. Penney brand."
An Off-Beat CEO Choice
Plucking an executive from Apple is an edgy move for the 109-year old department store chain, Kevin Ryan, CEO of Gilt Groupe, the nation's biggest private-sale website, told DailyFinance.
Johnson "is an interesting and creative choice because of [Apple's] success as a non-traditional retailer," Ryan says.
Johnson built Apple's stores from scratch, crafting what has been hailed in the retail sector as an unparalleled, idiosyncratic specialty-store experience marked by an uncluttered shopping environment and a cult-like attention to customer service.
By making Apple's stores airy, for one, "Johnson broke a traditional rule of retailing -- to put as much merchandise as you can in front of the consumer" -- and made it work, Ryan says.
By contrast, "When you walk into J.C. Penney today, it's sometimes hard to see the merchandise because it [can be] crammed in."
Still, merchandising a specialty computer store and merchandising a department store -- which sells everything from T-shirts to toasters -- are two very different selling propositions. And unlike Apple's relatively new store base, J.C. Penney is saddled with many stores in old, declining malls, Paul Swinand, a stock analyst with Morningstar, told DailyFinance.
The Target Factor
While the investment community is abuzz with Johnson's Apple pedigree, his track record creating distinct retail environments goes beyond that iconic company.
During a 15-year career at Target (TGT), Johnson played a key role in burnishing the retailer's image as the nation's cheap-chic discounter by spearheading the launch of exclusive designer home collections, such as the Michael Graves housewares line in the late 1990s that brought edgy lines with an upscale feel to a mass merchant's audience -- a new concept at the time.
Indeed, Johnson's work as vice president of merchandising for Target will be even more relevant for his new role than his tenure at Apple, Swinand says.
"If you think about Target, it [was] about finding that niche that's a little bit chicer and cooler, which is what Penney wants to be in soft goods." And if J.C. Penney has a shot at upping its cool quotient, Johnson is the executive to do it, he says.
That's going to mean staying relevant to its core, older shoppers with recent deals such as the exclusive Liz Claiborne line, "while helping J.C. Penney connect with a younger customer."
But while the Liz Claiborne line might be the perfect brand for the retailer's traditional Middle American consumer, "It doesn't move J.C. Penney forward in terms of tomorrow's customers," Johnson says.
Despite the retailer's challenges, Johnson appears to be a believer in J.C. Penney's future success.
And he's putting his money where his mouth is -- literally. Johnson invested $50 million in the company by purchasing warrants on 7.257 million shares of company stock.
"I have tremendous confidence in J. C. Penney's future," Johnson said in a statement.
"I've always dreamed of leading a major retail company as CEO, and I am thrilled to have the opportunity to help J. C. Penney re-imagine what I believe to be the single greatest opportunity in American retailing today, the department store."