A Struggling Retailer's Dumbest Move Yet
J.C. Penney (NYS: JCP) wants to stay a cut above the competition.
The struggling retailer is extending last month's promotion in which kids get free haircuts on Sundays.
Starting in November, J.C. Penney will begin offering haircuts at no charge to children in kindergarten through sixth grade on Sundays.
On the surface, it's easy to see why the problematic retailer is doing this. Freeloaders turned out in droves last month, keeping the department store chain's salons busy snipping away at 1.6 million young heads of hair.
We don't know how well things worked out for J.C. Penney last month, though. The CFO had some generally encouraging thoughts at an investing conference last month, but the chain stopped providing monthly same-store sales updates back in January.
Busy buzzers don't always generate buzz
It's hard to imagine J.C. Penney having a good run during last month's back-to-school shopping season. Comps fell a mind-blowing 21.7% in its fiscal quarter ending in July. They tumbled 18.9% during the previous quarter ending in April.
CEO Ron Johnson won investors over last year when he arrived. He seemed to have the perfect pedigree. He was a rising star at Target (NYS: TGT) before arriving at Apple (NAS: AAPL) in time to lead the rollout of the wildly successful Apple Store concept.
Unfortunately, J.C. Penney doesn't have the "cheap chic" allure of Target, and it's clearly no Apple. The "Fair and Square" pricing strategy that Johnson introduced in February has been a disaster in terms of action at the registers.
In theory, free haircuts would seem to help. The timing of the August promotion -- just as kids were gearing up for school -- was an opportunistic way to woo parents into the store, giving the chain a chance to explain its new everyday-low-pricing strategy and play up the upcoming "brand stores within a store" makeover.
We'll find out in November -- when J.C. Penney reports results for the current quarter -- if 1.6 million crops given away saved the day, but I doubt it.
Cultivating an audience of freebie seekers
If you feed a dog from the dinner table, it will always be hovering around for scraps. J.C. Penney could've gotten away with this promotion as a one-time August thing, but now it will be hard to let this promotion go.
You don't have to be a genius to see how this will all play out. Parents of the 1.6 million kids who got free dos last month may wait until November to come back. Don't expect them to come with long lists of holiday shopping to do.
J.C. Penney has a problem. It's not drawing enough customers, especially on the weekend, when traffic fell off even more than during the week earlier this year.
How will this help? J.C. Penney will start drawing in folks poor enough to put up with long lines at a hair salon for the sake of a free haircut, and this isn't a group likely to spend a ton of money at the store. Parents aren't going to want to leave their kids in the salon chair to go shopping, and after waiting around for a cut, most young kids will be too impatient to wait at a register.
What about potential shoppers without kids? How likely are they to visit a J.C. Penney now on Sundays knowing that it may be the equivalent of a Chuck E. Cheese without a ball pit?
The free cuts will have an impact, but not necessarily at J.C. Penney. You may not want to own Supercuts parent Regis (NYS: RGS) if free haircuts become the new retailer door prize. However, scissors wouldn't be my weapon of choice if I wanted to turn a struggling retailer around.
Hey, Johnson. The folks who queued up in front of your Apple Stores were never there to get something for free. They were lining up for the right to pay a premium for something that culturally mattered and worked.
Right now, J.C. Penney is failing on both fronts.
The article A Struggling Retailer's Dumbest Move Yet originally appeared on Fool.com.The Motley Fool owns shares of Regis and Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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