What CFOs Can Learn From JCPenney

Ken Hannah, CFO of JCPenney

JCPenney’s recent revenue and market share statistics have been anything but fashionable. In the fourth quarter of 2012, nationwide sales dropped a troubling 31.7 percent. Internet sales were even worse. To counter declining sales and negative press, JCPenney has not only revamped its sales strategy, but its public relations campaign as well. During this year’s Oscars, for instance, JCPenney purchased a total of six ads, all of which were focused on branding the retailer as an all-American brand. As pressure from investors increases, JCPenney’s CFO Ken Hannah insists that neither he nor CEO Ron Johnson plan to resign anytime soon.

Why JCPenney Is Struggling

Several financial analysts attribute the financial struggles to the company’s new “Fair and Square Every Day” strategy. Under this plan, instead of running daily, weekly, or monthly sales, JCPenney dropped its prices across the board. The mentality behind this move is that instead of waiting for a sale, consumers can have low prices all the time, according to Ron Johnson.

The only problem with this strategy is that consistently low prices don’t motivate customers to shop like a sale does. While sales create a sense of urgency that drive consumer spending, consistently low and “fair” prices result in consumer apathy. JCPenney has experienced declining sales over the last four consecutive quarters.

JCPenney’s New Strategy

Chief Financial Officer Ken Hannah drew a lot of attention early in March when he sold 10 million of the company’s shares. When asked why he dumped the shares, Hannah replied that it “just wasn’t worth the effort.” As the company struggles to regain its market share, this move serves as a lesson to executives everywhere: Focus your energy on what matters.

Furthermore, JCPenney has rethought its “Fair and Square” strategy and has reintroduced sales nationwide. While the company aggressively denies plans to close stores, some say that’s the most reasonable solution to their struggles. As JCPenney brings back their sales, this is a reminder to CFOs and executives everywhere to employ strategies that resonate with consumers. The company could have saved time and money by researching their “Fair and Square” strategy before implementing it.

Whether or not it’s too late for JCPenney to recover remains to be seen, but it’s clear that CFO Ken Hannah and CEO Ron Johnson are aggressively fighting for the company to regain its leadership in the market. As JCPenney resumes holding sales and the company focuses on more worthwhile efforts, both Hannah and Johnson hope to see new growth throughout 2013.