Ron Johnson was hired as CEO of JCPenney in 2011 to transform the struggling 110-year old retailer. He aimed to target all income classes instead of just lower-middle incomes and eliminate sales and coupons in favor of "fair prices" displayed openly. However, after the first quarter, sales dropped 20% as customers disliked the pricing changes and store layout became confusing without signs. While some praised Johnson's vision to modernize, the board faced a decision whether to replace him or let him continue his transformation plan.

1. RETAIL
REVOLUTION
Gary Trinh
RA6007502
Peter Marozzi
RA6027065
Laura Fan
RA6007798
Nguyen Hai Viet
RA6007463
The new CEO reinvented his last
two companies - but is his latest
vision a pipe dream?
Group 10:

2. Company Background
• 110-year-old Plano, Texas based clothing
retailer
• Founded on the Golden Rule: “Treat
people as you‟d want to be treated.”
• Mainly targets lower-to-middle-class
families

3. Persons of Interest
Thomas Engibous
Executive Chairman
Previous Texas Instruments CEO
Bill Ackman
Activist Investor
CEO of Pershing Square
Capital
Mike Ullman
Previous JCPenney CEO
Served from 2004 - 2011

4. History
2010
•Bill Ackman acquires 17% stake in
company
•JCPenney ends catalog business
2011
•Bill Ackman convinces board to fire
Ullman
•Ron Johnson is hired as CEO
2012
•Johnson eliminates sales and coupons
•Company lays off about 10% of its
workforce

5. Cotton
(dollars per pound)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50

6. Stock Price
$0
$25
$50
$75
$100

7. $0
$3
$5
$8
$10
Revenue
(in billions of dollars)

8. Clothing Retail
(in billions of dollars)
$0
$100
$200
Physical Online

9. Ron Johnson
2000 - 2010
• Worked as the SVP of
Retail under Steve Jobs
• Implemented move from
online only to brick-and-
mortar stores
• Most profitable
retail business
AAPL:$6,000/ft2
JCP:$150/ft2
1990 - 2000
• Worked as the Vice
President of
Merchandising
• Implemented cheap
chic and design trends at
Target
• Stock price
and company
performance
skyrocketed

10. Thoughts on Leadership
• “Internally I think of myself more of a captain. I‟m one of
the teammates … ultimately I just want to lead the
team. So as a captain I get to play. I want to be
involved when they do work, I don‟t want to review work
when it‟s done.”
• “I don‟t just want to run a business… I want
the chance to transform something. I didn‟t
come here to improve Penney, I‟m here to
transform Penney.”
• “This is like we‟re a big $18 billion startup. And we‟re
going to act like a startup in how we make decisions.
We can move as fast as we‟re willing to.”

11. The Offer
• Bill Ackman often worked hard to improve the
performance of companies he invested in by
getting actively involved, including pushing for
CEO and board member changes.
• After years of pushing, Ackman finally got the board to
agree to change JCP‟s CEO.
• Johnson received $50 million worth of JCP stock
with a 6-year restriction. If the stock was below
the price at which he received them, he would get
nothing. Johnson also purchased the same
number of shares with his own money. His future
is their future. Stock up 10% on announcement.

12. Goal: Become “America‟s Favorite Store”
Customers: Target all classes, instead of just low-income
Timeline: Change all stores immediately and
simultaneously Complete transition within 3
years
Strategy:
• 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 concepts
The Vision

13. • Massive promotional campaign in
print and TV
• Ellen Degeneres (former employee)
would be national spokesperson
• Prices no longer listed in promotions – prices on items in
store showed „fair and square everyday price‟ next to
MSRP
• New logo intended to modernize company image and
appeal to larger customer base
Marketing

14. • Closed several of JCP more than
1,000 store locations
• Cut staffing at headquarters by 10%
while eliminating positions at many stores
• Replaced most upper-level executives with hand-picked
set of the best and brightest from across the retail
industry, including top executives from Target, American
Eagle and Abercrombie and Fitch
• Move away from employee commission on sales to
encourage teamwork and collaboration
Organization

15. Suppliers:
• Eliminated many established brands
• Some suppliers sections unfinished
• Basics (underwear, socks) sales way down
Customers:
• Some prices not relabeled, causing
confusion
• Difficulty finding checkout areas
• Loss of coupons and sales frustrating
Employees:
• Memos and formal communication
eliminated
• Large workforce layoffs
Problems

16. Results
After only a few months, the results of the first quarter
came 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 takes
time

17. Discussion
• How do you think Johnson could achieve
his vision?
• What do you think contributed to the
decrease in sales?
• What is the difference in the mindset
between a Vice President and a CEO?
• Which kind of thinking does Johnson
display?

18. Decision
Should the board replace
Johnson or let him follow
through with his vision?

19. Thank You!