The Top 3 New Year's Resolutions for J.C. Penney


The arrival of the new year is a time to reflect. When looking back on this year, a few stories stick out as some of the more memorable. J.C. Penney is among a few stocks that had an absolutely dismal 2012. Over the course of 12 months, the stock saw the biggest exodus since Egypt in 1313 B.C. But in the spirit of the holidays, it is best to look forward and to try to learn from the past.

J.C. Penney is in the midst of a serious overhaul, one that won't be complete until at least 2015. It is expected that there would be hiccups along the way, but there were some that were more like burps, and the company needs to mind its manners in 2013. Without further ado, here are my top three New Year's resolutions for J.C. Penney.

1. Get the sales straight
Americans like sales; that's a no-brainer. Put something in front of us that is less than what you say it's worth, and we'll buy it. So when this company took away its sales promotions, it frustrated us. Unsurprisingly, people did not react favorably. This was an initial response that J.C. Penney needed to persuade people to just get over, not bow down to.

Instead, the company went back on its everyday low pricing and started couponing again and doing sales. Not cool. Now the company is messing with our emotions -- and you can't mess with the emotions of the discount shopper. It's very rare that I will cite former CNBC analyst /emotional issues spokesperson Jeff Macke, but in a recent piece he highlighted the pricing problems as indicative of a greater issue: J.C. Penney lacks definition.

Ron Johnson needs to stick to a strategy and power through it. Wavering back and forth simply confuses shoppers. At this point, J.C. Penney is a confusing entity to shoppers. They don't know if it's a discount chain, a fashionable retailer, or something in between. The company needs to go full speed ahead in its transformation so that it can clearly define itself to customers.

For 2013, J.C. Penney needs to be more like the J.C. Penney that the company said the new J.C. Penney was supposed to be like. A blend of old and new will do nothing but frustrate and deter shoppers.

2. Choose good brands
I like the mini-mall idea. Really I do. I think it's the smartest way to leverage that 111 million square feet of retail space the company has lying around. But filling it with miniature versions of stores no one wants to go to won't help. For instance, why did J.C. Penney bring in Joe Fresh? Joe Fresh is a cheap-chic fashion brand owned by a Canadian grocer.

In a recent New York Times article, the author described Joe Fresh clothing: "Most had an air of disposability, like hospital scrubs." The last thing J.C. Penney needs is a low-quality line to confirm the suspicions that the store is no different from before.

The decision to bring in Sephora was great, though. The Martha Stewart partnership was another smart one. Come 2013, maybe it'll make a lot of women happy with a fine selection of throw pillows featuring rare winter fauna.

The thing is, J.C. Penney is already trying to persuade people to give its stores one more shot, so you have to pull at their heartstrings. The brands the company brings in need to be class-leading to lure new customers.

3. Beware of technology
This Fool is a huge fan of Ron Johnson. If there was one person on planet Earth who has a snowball's chance in Doha of turning this company around, it's the Apple Store's daddy. But be careful. I don't think we're in Cupertino anymore, Toto.

J.C. Penney plans to eliminate all of its checkout stations by 2014, replacing them with people floating around with mobile checkout devices and iPads. But Johnson needs to remember that J.C. Penney is still relevant in the minds of many people's grandparents. They don't read TechCrunch every day, and they're going to be very confused when they find that perfect pair of slacks and have nowhere to pay for them. If Johnson changes everything to the "store of the future" model, the only senior citizen shopping in the stores will be Walt Mossberg.

Switching the inventory system over to an RFID model will certainly save money down the road, and I applaud Johnson for taking those steps when so few retailers will. But let's be honest: J.C. Penney's old inventory setup probably looked like Hostess' pension fund -- full of cobwebs and a great place for management to play hide-and-seek.

Best of luck
I am one of the few J.C. Penney supporters out there. I really want this remodeling to work. More important, I think this new model can work. But it requires confidence on behalf of the shopkeep. If the company can't seem to figure out what it wants to be, how can it expect shoppers to understand? As of now, the company is using some sales promotions, and it should stick with them -- no more flip-flopping. Shoppers will come around to the new J.C. Penney. They just need to know what that means.

More coverage from The Motley Fool
J.C. Penney has been a train wreck whose comeback always seems just around the next earnings corner, but people are beginning to doubt whether Johnson can weave the same magic he did at Apple. Investors wondering whether J.C. Penney is a buy today are invited to claim a copy of The Motley Fool's new must-read report on the company. Learn everything you need to know about Penney's turnaround -- or lack thereof -- and as a bonus, you'll receive a full year of expert guidance and updates as key news develops. Simply click here now for instant access.

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Fool contributor Michael B. Lewis has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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