JC Penney shares plunged on Wednesday after the retailer issued disappointing earnings and revenue for the first quarter, the company's first with former Apple executive Ron Johnson running the show. The stock fell nearly 20 percent in Wednesday trading after the report, and is now down nearly 25 percent on the year. Investors had been hopeful for the first-quarter numbers, counting on Johnson, who led the successful opening of Apple's retail stores, to turn the struggling retailer around. In fact, the stock surged 17 percent back in June 2011 when Johnson was first introduced as the new CEO.
Of course, Johnson devised a comprehensive reorganization of the Plano, Texas retail chain, spanning four years altogether. The plan involves closing out the company's outlet stores, a massive remodeling of its stores, already in progress, and a revamping of the company's pricing strategy, which involves doing away with weekly sales and pricing products in three phases, with discounts lasting for longer periods of time. The transition is proving to be more difficult than expected, as evidenced by the weak first-quarter results.
In the three months ended in April, Penney's same-stores sales, or those at stores open a year or more, fell 19 percent and online sales slipped 28 percent. In a conference call held to discuss the results, CEO Johnson noted that boosting sales and raising margins was proving “tougher than anticipated,” but vowed to stay the course. Overall, the company posted a net loss of $55 million, or 25 cents a share, prompting the retailer to do away with a planned 25 cents-per-share dividend in the hope of saving $175 million a year.