Has JC Penny Rediscovered a Business Management Secret?

I posted a bunch last year (search the blog archives for keyword Penny) about my feelings about JC Penny’s actions in abandoning their repositioning strategy. Bottom line was that if the old strategy was not going to achieve the company’s goals, how does bringing it back make sense? I even hypothesized that the company might file for Chapter 11 after the holiday season. (I was wrong on that one.)

Let’s review quickly the facts of their history since returning to their old strategy: Their 2013 holiday sales were up over 2012. Their outlook is positive, their stock price is up and they are re-attracting lost customers from the “failed” repositioning strategy. Simply put, they are getting lots of positive press.

Why? They have not even returned to the levels they were at when the Board decided their original, and now return-to strategy, was insufficient to achieve their goals. Answer: Make things worse for a while and then the old, unacceptable situation doesn’t seem so bad.

Reminds me of the old story about the guy beating his head against a wall and when asked why he was doing it he replied, “Because it feels so good when I stop.”

I reiterate my original position from when the Board fired their repositioning CEO, Ron Johnson: The Board is incompetent, in my opinion. Either the company did not need a repositioning to achieve its goals or it did. You can’t have it both ways. But then again, if you make things worse, then striving to get back to a previously unacceptable position can seem a positive.

Mitch

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