"You know, I watched this movie before. When I joined Apple in 2000, Apple was a company dwindling. Everyone said to me, 'What are you doing there?' " Mr. Johnson told investors in September. "Apple wept through 2002 and I think sales were down 38 percent as we dreamed about becoming a digital device company. But Apple invested during that downturn. That's when Apple built, started to build its chain of stores. That's when Apple transitioned to Intel. That's when Apple started its app division. That's when Apple imagined and built the first iPod."
O.K., Mr. Johnson, but that was Apple. And J.C. Penney is not Apple - and let's be honest, it can never be Apple. The company doesn't make its own magical, revolutionary products that bring tears of joy to its customers. It is a low-end department store that Mr. Johnson is hoping to turn into a slightly higher-end department store that sells clothing made mostly by other manufacturers.
Still, Mr. Johnson has sought to remake the company quickly, perhaps too quickly, by eliminating promotions and discounts, moving the stores more upscale, rebranding the company as JCP and putting in place a "fair and square" pricing model. (J.C. Penney is, however, putting on a special sale for the holidays.)
Yet the renovations are hardly finished — or in some cases even started. Only 11 percent of its stores' floor space has been remodeled with his successful specialty-store-within-a-store concept, in which he has opened up outposts for brands like Levi's, Izod, Liz Claiborne and the Original Arizona Jean Company.
J.C. Penney may have been dying a slow death before Mr. Johnson's arrival — some rivals used call it "death by coupon," given the retailer's penchant for discounts — but the company's decline has only accelerated.
But the lessons, and successes, of the rollout of Apple stores are proving that they do not apply to Penney. While the customer experience at Apple is in a class by itself, and Mr. Johnson should rightly receive credit for that, the success of the stores was in large part a function of stunning products with a fan base that would stand outside stores for days in the rain to get their hands on them without any chance of a discount. Do you think there are customers who will ever stand outside J.C. Penney overnight for the next Liz Claiborne sweater? (J.C. Penney bought the Liz Claiborne brand last year.)
"Ron Johnson's remake of JCP has assumed the consumer — the only one who matters — is the one who shops at Target or Macy's or Nordstrom's . Instead of pivoting on and strengthening the historic JCP brand, Johnson's decided to recreate the Target and Apple wheel, a move akin to Toyota suddenly deciding it's Porsche. In short, a ridiculous and condescending move," Margaret Bogenrief, a partner at ACM Partners, a boutique crisis management and distressed investing firm, recently wrote.
There is something romantic about watching Mr. Johnson try to remake a dying classic icon. At some gut level, you have to root for him. He's making a bold bet. Transitions are inherently painful. And everyone loves a great comeback story.
Here's the good news: In the stores that have been transformed, J.C. Penney is making $269 in sales a square foot, versus $134 in sales a square foot in the older stores. So the model itself is working. And Mr. Johnson has the support of the company's largest shareholder, Pershing Square's Bill Ackman, who personally recruited Mr. Johnson. If Mr. Johnson were starting with a blank slate, it might be a great business.
Mr. Ackman declined to comment. J.C. Penney did not make Mr. Johnson available.
Now here's the bad news. Mr. Johnson still has to convert nearly 90 percent of his square feet of shopping space. That will very likely take $1 billion and as long as three years. If the sales decline that occurred last quarter accelerates, the company could run out of money. It now has about a half-billion in cash and access to a credit line for as much as $1.5 billion.
Of course, it remains possible that Mr. Johnson, who people close to him say is a realist, could always decide that the transformation is not working and change course to return to the old model of J.C. Penney and save all that money remodeling. But that would be a huge setback.
The question Mr. Johnson may be asking himself now is: What would Steve do?