Former J.C. Penney Co. (JCP:US) Chief Executive Officer Allen Questrom said the retailer should be prudent as CEO Ron Johnson implements a plan to turn most of the chain’s locations into collections of boutiques.
“In high risk situations, one needs to be prudent,” Questrom said yesterday in a telephone interview. “Decisions can’t be Powerball chances. You’re responsible for employees and managing shareholders’ money.”
Questrom, who was called in to turn around the retailer more than a decade ago, spoke after touring a prototype store in Dallas at the invitation of Johnson. Last year, Johnson announced a plan to revamp the retailer and move to everyday low pricing instead of frequent sales. In February, the company said its 2012 sales plunged 25 percent, and it has backed off its pricing strategy.
Questrom said he spent about 45 minutes with Johnson, whom he called “very nice, very energetic, very enthusiastic.”
While he told Johnson he thought the shops were interesting, “the question wasn’t whether I liked them but whether the customer liked them.” Retailers need to constantly test and observe, he said, along with talking to their customers and salespeople.
“As a merchant, you’re not a designer,” he said. “The job is to find things your customer likes and test it with her or him.”
J.C. Penney, based in Plano, Texas, rose (JCP:US) 2.5 percent to $15.45 yesterday in New York. The shares have declined 22 percent this year, compared with an 8.9 percent gain in the Standard & Poor’s 500 Index.
Questrom said in an interview with Bloomberg last month that he didn’t think Johnson’s turnaround plan would work, “and the longer the board waits, the worse it’s going to get.”
Questrom knows something about turnarounds. The longtime retail executive came in to revive an ailing J.C. Penney in 2000. Profit rose 31 percent in 2004, the year of his departure. During his time there, he centralized buying and revamped stores.
Hedge-fund manager Bill Ackman brought Johnson to J.C. Penney in 2011 from Apple Inc. after he disclosed a 16.5 percent stake in October 2010, becoming the retailer’s largest shareholder. Johnson made changes much too quickly, and the turnaround’s execution “has been something very close to a disaster,” Ackman said yesterday at a conference, Reuters reported.
Daphne Avila, a J.C. Penney spokeswoman, declined to comment on Questrom’s and Ackman’s comments.
Questrom’s store tour was earlier reported by Women’s Wear Daily.
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