JCPenney Stock Plummets After Hours; Brand Manager Out

After hours on Monday, June 18th, 2012 JCPenney stock took a tumble.  Shares were down almost 6% to $22.90 as brand manager Michael Francis was axed after the simplified pricing strategy did not work out.  Unlike most retailers, JCPenney was working away from week long sales and deals with coupons.  This is similar to the Apple Store, where current CEO Ron Johnson used to work, but Apple has a much different product line.

JCPenney Stock Down 31% Year to Date

Since the beginning of 2012 most retail stocks have pushed higher.  In fact, stocks like Ulta, Family Dollar and Dollar Tree are up over 25%.  During this same time frame JCPenney is down 31%.  This is one of the main reasons Michael Francis is no longer the brand manager at this major retailer.  In the last 10 years most retailers have pushed weekly sales and deals through a sales ad.  This sales ad often comes out on Sunday and it offers unique price points for one full week.

JCPenney was adamant that they were going to break this retail model.  JCPenney color coated their pricing with red, white and blue tags.   Each tag signified a different pricing pattern but none of these prices were week long sales.  The company attempted to offer everyday prices, month long prices and clearance.  Unfortunately, this only confused customers as they had no idea which prices were the best.  Retailers like Best Buy, Target and Walgreens clearly state sale prices with big signs and a sales ad.

Google Search trends have shown that more and more Americans are looking for sales and deals.  This is something that JCPenney did not consider when creating this pricing strategy.  During major holiday events such as Memorial Day, Labor Day and Black Friday customers want to see a one day or one weekend offer.  JCPenney did not do this on Memorial Day and the stock prices clearly depicts how customers felt about this.

Retail Stocks ETF Near All Time High

The Retail ETF (RTH) is nearing an all time high of $42.50 in the middle of June 2012.  There are several low cost retailers that have seen their stock hit an all time high in recent weeks.  Some of these names include Dollar Tree, Family Dollar and Ulta.  All of these companies have a one week sales ad that JCPenney was looking to avoid.  In fact, Ulta has seen their stock price rise almost 70% in the last year because of the great coupons and specials they offer.  There is very little argument to be made that JCPenney will need to go back to the weekly sales and deals strategy that almost all retailers are currently using.