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JCPenney: One of the Greatest Mistakes in Retail History?

JC Penny
Ryan T. Conaty | Bloomberg | Getty Images
JC Penny

Same store sales down 19 percent in Q1. Huh? This has got to be one of the worst quarters in the history of retailing.

was hit with a double whammy today: not only were earnings a huge disappointment after the close, but their competitors are gaining on them.

Management changed the shopping experience but didn't change the quality of the product. There is no call to action.

They went from Sale Everywhere to everyday low prices. They thought everyday low prices would work. But it hasn't. Imagine: you're in the store, you're not sure what to buy, but the sign next to underwear screams "SALE!"

Instead of $20, the underwear is $12. That creates a call to action.

Today, it just says "underwear" with a sign that says $12. Everyday low prices doesn't do it.

Another problem: the quality of the clothes have never been great. Others (Macys) have made big strides with merchandise. JCPenney hasn't.

So the problem is also WHAT they are selling, not just how they are selling it.

My point: when was the last time you saw "SALE!" at TJX ? How about, never? They mark goods down, but you don't see storewide sales. So you can do everyday low prices, if the merchandise is right.

Pulling the dividend: not good, but not the main issue. Nobody owns JCP for the yield. It's not exceptional: Macy's just reinstated the dividend, Kohls is 2.8 percent, Target is 2.2 percent, Wal-Mart is 2.7 percent.

And what about the leadership of CEO Ron Johnson? It's too early to call for his head, they will almost certainly give him until the end of the year.

But the competitors are dancing. It's a complete repudiation of the strategy.

And look at TJX, with great numbers today, closing near an historic high. They are taking market share from JCP and Kohls, especially in the critical 18-35 demographic.

Is this one of the greatest mistakes in the history of retailing?

Sears did this too. They never recovered.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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