Plano, TX—Saying that JCPenney’s “leaner and more simplified operating structure is fundamentally complete,” Ron Johnson, the retailer’s ceo, said today that another 350 employees would be eliminated from its headquarters here.
“In April, we began right-sizing our headquarters from a people perspective to align our teams with JCPenney’s new business model,” Johnson said. “The actions taken today mark the final phase of those efforts. We have simplified processes, removed unnecessary work and reduced layers to help us make better and faster decisions. While difficult, these decisions are in the long-term interests of jcp and our stakeholders.”
When JCPenney announced its new Fair and Square pricing strategy earlier this year, the company said it targeted $900 million in expense savings. The company said that target would be met by the end of this year—one year ahead of its initial plan. Some of that savings, about $200 million a year, is estimated to be from a leaner main office.
Headed for a Big Q2 Loss?
The job cuts, which had been rumored for weeks, follow JCPenney’s dismal first quarter when its comparable store sales plummeted 18.9%. Since then the company has relaxed its no-sale strategy and Johnson assumed all marketing duties from Michael Francis who left the company abruptly last month.
While William Ackman, whose hedge fund is the largest shareholder in JCPenney, has defended the transformation—and backed Johnson, some retail analysts remain skeptical that the everyday low price strategy will work.
Credit Suisse analyst Michael Exstein wrote in a report that JCPenney at its current sales decline, JCPenney is on track to lose about $1.6 billion in sales or 9% of its 2011sales base. “This sales erosion makes a turnaround even more daunting as the second half approaches.”
Exstein criticized the company for being slow and cancelling orders, yet refusing to markdown readytowear when competitors such as Macy’s cut prices to move stale inventory.
“The result of these actions as well as the overall weak sales pace has been profound in terms of the vendor community,” Exstein said. “In fact, the attitude of the vendors has gone from ‘we can’t be left at the station as this train leaves’ to ‘will this train ever leave the station?’”
Exstein predicts that JCPenney will post a “50-cent loss per share in the second quarter, down from prior expectations for a 31-cent loss.”