Report: JCPenney Engages in “Price Achoring”?

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

JCPenney recently reintroduced its former red-and-white logo

Plano, TX—JCPenney’s stock has been volatile in recent weeks mostly due to speculation about the struggling department store’s business during fourth quarter and its upcoming earnings report.

Retail analysts speculate that the department store will report a $1.86 billion loss for fiscal 2013 during its next earnings report in late February.

But Thursday, the retailer’s shares fell more than 8% to a low of $5.77 a share following a report from the New York Post alleging the store was engaging in price anchoring with some Valentine’s Day merchandise.

It’s not the first allegation that JCPenney has engaged in the price of jacking up a list retail price to make its discounted price look all the more appealing.

Poison Pill Revised Too

According to what sources told the Post, JCPenney has been raising initial markups, particularly in jewelry, so “it could fatten the percentage markdowns beginning with a Valentine’s Day sale next month.”

Thus enabling the store to advertise “discounts in the 40%- to-60% range, versus discounts that had typically been in the 20%-to-30% range the past year.”

Speaking of its share prices, JCPenney earlier this week lowered the threshold in its shareholder rights plan. The threshold of what is known as a poison pill had been 10%, now it has been lowered to 4.9%.

Should any person or group acquires 4.9% or more of JCPenney’s outstanding shares of common stock without board approval, there would be a triggering event causing significant dilution in the ownership, a poison pill.

According to Thomson Reuters, the only JCPenney shareholders with stakes above that threshold would be State Street Global Advisors, Soros Fund Management and The Vanguard Group.

The poison pill was initially set to expire in August, but now will be valid until January 26, 2017.