Picking up the Penneys
J.C. Penney's new home department is like Technicolor Oz plunked down in black-and-white Kansas.
Dreamed up by Ron Johnson -- the former Apple retail wizard ousted in April as chief executive officer -- the new housewares emporium features vibrant colors, wood fixtures and other modern flourishes.
The rest of the century-old department-store chain? Not so much.
The dichotomy is a challenge for CEO Myron Ullman: Johnson's vision is too far along to abandon, yet J.C. Penney is consuming cash faster than any other U.S. brick-and-mortar retailer. So Ullman, 66, has opted for what might be described as Johnson Lite as he sets about renovating the two-thirds of store space left untouched during Johnson's 17-month tenure.
Rather than a mini-mall of 100 branded shops, Ullman is testing scaled-down versions of the concept, including one selling Haggar and Dockers khakis that looks nothing like Johnson's proposed Khaki Bar. If it works, Ullman will do the same with additional national and house brands.
As he renovates the stores, Ullman must appeal to the younger shoppers Johnson was chasing and the chain's older, more conservative customers, said Paul Swinand, an analyst for Morningstar Inc. in Chicago.
The contrast between old and new may be "jarring" for some of them, he said. "It's an issue they have to address."
Ullman, who ran the chain from 2004 to 2011, initially focused on shoring up J.C. Penney's finances after returning. He borrowed $850 million from the company's credit line and secured a loan of $2.25 billion from Goldman Sachs Group Inc.
That helped boost the Plano, Texas-based chain's shares, which have gained 12 percent since Ullman's return. Still, they trade at a 73 percent discount to the Standard & Poor's 500 Retailing Index on a price-to-sales basis, according to data compiled by Bloomberg.
Now Ullman is trying to win back customers who decamped in droves after Johnson axed most discounts for an everyday low pricing model. Deals are back and feature prominently in advertising, which under Johnson sought to persuade shoppers that J.C. Penney was drop-dead cool. Ullman even green-lighted an ad that acknowledged mistakes and pleaded for customers to return.