Maybe worthwhile to mention other large retails such as K-Mart and Sears have struggled in recent years.
We should mention Engibous being an important factor in the transformation of Texas Instruments. And also that Bill Ackman is very active and vocal in his positions (massive $1 billion herbal life short, attempt to change board at P&G, also attempted to change board at Target)
Arrow indicates Johnson’s hiring
Again, Johnson’s hiring
Still, Johnson’s hiring
Explain that this is based on US census data and new data isn’t available yet. The main point is to show that while Online sales are growing, they aren’t going to overtake retail anytime soon.
Partnered with Michael Graves at Target (huge change in product line-up)
Ld final project edits
RETAILREVOLUTIONGary TrinhRA6007502Peter MarozziRA6027065Laura FanRA6007798Nguyen Hai VietRA6007463The new CEO reinvented his lasttwo companies - but is his latestvision a pipe dream?Group 10:
Company Background• 110-year-old Plano, Texas based clothingretailer• Founded on the Golden Rule: “Treatpeople as you‟d want to be treated.”• Mainly targets lower-to-middle-classfamilies
Persons of InterestThomas EngibousExecutive ChairmanPrevious Texas Instruments CEOBill AckmanActivist InvestorCEO of Pershing SquareCapitalMike UllmanPrevious JCPenney CEOServed from 2004 - 2011
History2010•Bill Ackman acquires 17% stake incompany•JCPenney ends catalog business2011•Bill Ackman convinces board to fireUllman•Ron Johnson is hired as CEO2012•Johnson eliminates sales and coupons•Company lays off about 10% of itsworkforce
Cotton(dollars per pound)$0.00$0.50$1.00$1.50$2.00$2.50
Clothing Retail(in billions of dollars)$0$100$200Physical Online
Ron Johnson2000 - 2010• Worked as the SVP ofRetail under Steve Jobs• Implemented move fromonline only to brick-and-mortar stores• Most profitableretail businessAAPL:$6,000/ft2JCP:$150/ft21990 - 2000• Worked as the VicePresident ofMerchandising• Implemented cheapchic and design trends atTarget• Stock priceand companyperformanceskyrocketed
Thoughts on Leadership• “Internally I think of myself more of a captain. I‟m one ofthe teammates … ultimately I just want to lead theteam. So as a captain I get to play. I want to beinvolved when they do work, I don‟t want to review workwhen it‟s done.”• “I don‟t just want to run a business… I wantthe chance to transform something. I didn‟tcome here to improve Penney, I‟m here totransform Penney.”• “This is like we‟re a big $18 billion startup. And we‟regoing to act like a startup in how we make decisions.We can move as fast as we‟re willing to.”
The Offer• Bill Ackman often worked hard to improve theperformance of companies he invested in bygetting actively involved, including pushing forCEO and board member changes.• After years of pushing, Ackman finally got the board toagree to change JCP‟s CEO.• Johnson received $50 million worth of JCP stockwith a 6-year restriction. If the stock was belowthe price at which he received them, he would getnothing. Johnson also purchased the samenumber of shares with his own money. His futureis their future. Stock up 10% on announcement.
Goal: Become “America‟s Favorite Store”Customers: Target all classes, instead of just low-incomeTimeline: Change all stores immediately andsimultaneously Complete transition within 3yearsStrategy:• Eliminate coupons and sales• Give customers a “fair and square deal”• Create an in-store experience (coffee shops, etc.)• Uniquely branded store-within-a-store conceptsThe Vision
• Massive promotional campaign inprint and TV• Ellen Degeneres (former employee)would be national spokesperson• Prices no longer listed in promotions – prices on items instore showed „fair and square everyday price‟ next toMSRP• New logo intended to modernize company image andappeal to larger customer baseMarketing
• Closed several of JCP more than1,000 store locations• Cut staffing at headquarters by 10%while eliminating positions at many stores• Replaced most upper-level executives with hand-pickedset of the best and brightest from across the retailindustry, including top executives from Target, AmericanEagle and Abercrombie and Fitch• Move away from employee commission on sales toencourage teamwork and collaborationOrganization
Suppliers:• Eliminated many established brands• Some suppliers sections unfinished• Basics (underwear, socks) sales way downCustomers:• Some prices not relabeled, causingconfusion• Difficulty finding checkout areas• Loss of coupons and sales frustratingEmployees:• Memos and formal communicationeliminated• Large workforce layoffsProblems
ResultsAfter only a few months, the results of the first quartercame in.Negatives:• Overall sales were down 20%• Customer spending was down 5%• Same store sales decreased 10%Positives:• 67% of items bought at regular price vs 1%before• Transformation will be 3 years; change takestime
Discussion• How do you think Johnson could achievehis vision?• What do you think contributed to thedecrease in sales?• What is the difference in the mindsetbetween a Vice President and a CEO?• Which kind of thinking does Johnsondisplay?
DecisionShould the board replaceJohnson or let him followthrough with his vision?