J.C. Penney "Comeback" Commercial Will Not Work


J.C. Penney Co. Inc. (NYSE: JCP) has decided to waste money on a television commercial that asks customers to "come back." Why? "We heard you." Put another way, J.C. Penney has made a new promise to change, perhaps to what it was two years ago, before sales plunged. Unfortunately, mainstream retail traffic market share is a close to a zero-sum game in America. Troubled retailers have to steal customers from the competition to recover. J.C. Penney has no chance to do that.

The problem with revenue growth in the U.S. retail industry is demonstrated in the financial results of several of the business's largest companies.

Wal-Mart Stores Inc.'s (NYSE: WMT) total revenue grew 5% in its most recent fiscal year to $469 billion. However, Walmart's U.S. sales grew less than 4%. Same-store sales only rose 2%. Target Corp. had (NYSE: TGT) a similar problem. Revenue in its most recent complete year rose 5.1% to $72 billion. Comparable-store sales rose only 2.7%. And the two retailers owned by Sears Holdings Corp. (NASDAQ: SHLD) - Sears and Kmart - are shrinking. None of these three companies has added more than a tiny number of stores, and Sears has cut some.

J.C. Penney ended its most recent fiscal year with 1,104 stores. Against those, revenue fell 24.1% to $13 billion. J.C. Penney will need to close some underperforming stores to improve margins. A shrinking store base is hardly a good foundation to add customers. Perhaps the worst news from its annual report was that Internet sales decreased 33% to $1 billion. J.C. Penney has no chance to compete with Amazon.com Inc. (NASDAQ: AMZN) and other large retail e-commerce sites. It is no news that e-commerce already has started to trump brick-and-mortar sales.

J.C. Penney customers have gone somewhere, perhaps to other retailers, and some may have turned to e-commerce. Wherever they went, they went because they thought these places were superior to J.C. Penney, maybe in terms or prices, in merchandise or in customer service. J.C. Penney would not only have to reach millions of them with its new message. It also would have to compel these consumers to come back to an experience they abandoned because they did not like it.

Walmart, Target and Amazon mean to keep those J.C. Penney customers. J.C. Penney will have to come and take them. So far, it has not given them any reason to return.

Filed under: 24/7 Wall St. Wire, Media, Retail Tagged: AMZN, featured, JCP, SHLD, TGT, WMT