JC Penney Ramps Up Promotions in Wake of Dismal First Quarter

Adds More 'Best Price Fridays,' Highlights Savings for Customers

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JC Penney is ramping up its promotional messaging in the wake of a dismal first quarter.

JC Penney CEO Ron Johnson
JC Penney CEO Ron Johnson

The retailer has added five "Best Price Fridays" to its calendar, according to a report from Deutsche Bank analyst Charles Grom. The first took place last Friday, just prior to the highly promotional Memorial Day Weekend. And another is slated for Black Friday in November. The dates were selected for their promotional intensity, rather than current inventory levels or sales patterns, the report said.

Originally, CEO Ron Johnson's pricing scheme called for "Best Price Fridays" to be held only on the first and third Fridays of the month, which is when many consumers receive paychecks. Certain products are marked down on those days, and the lower prices are in effect until the product sells out.

"The additional Best Price Fridays equates to adding promotions and is a step away from the company's three kinds of pricing strategy, suggesting that the company is willing to forgo its original thinking," Mr. Grom wrote.

Store associates also have been instructed to place stickers with new prices for best price and month-long value items next to, rather than on top of , original prices. The new approach will better highlight savings for customers. That strategy is also in keeping with the "Do the Math" campaign, launched in March. One ad in the campaign showed a dress that would have been $39.99 with a discount and coupon last year costs $35 this year, for example.

"The change in strategy is an admission that the company's existing three-tiered pricing strategy has flaws -- less than 120 days since Ron Johnson's new model took course on Feb. 1," Mr. Grom stated. "Furthermore, we believe the move could confuse its shopper base even more, with some Fridays now 'Best Price' and some others not."

JC Penney did not respond to a request for comment.

Mr. Johnson and his team have been clear that a transformation shouldn't be expected until 2015. But poor first-quarter results raised plenty of questions. The retailer lost $163 million in the first quarter. Sales skidded 20%; traffic slowed 10%; conversion and average customer spending both fell 5%.

In discussing first-quarter results, executives admitted there has been confusion surrounding its pricing strategy and lack of coupons. To combat that and wean consumers off the coupon "drug," JC Penney began running newspaper ads in major markets highlighting its month-long values. Marketing messages also carry the current price, compared to the previous price, to better illustrate the value for consumers. In stores, price points have been added to mannequins.

"Our first 90 days are a little tougher than we expected," Mr. Johnson recently told analysts and investors. "But the good news is the transformation, from my perspective, is way ahead of schedule. ... We're trying to essentially convert the Titanic into 1,100 WaveRunners."

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