* Brings back industry wide "high-low" pricing tactic
* Latest reversal after struggling turnaround
By Phil Wahba
NEW YORK, March 27 J.C. Penney Co Inc is
in the process of raising prices on millions of its own branded
items to protect profit margins, as it reverts to a strategy of
offering discounts in an effort to win back the
bargain-conscious shoppers it lost last year.
The move marks a return to a standard pricing tactic in
retail also used by rivals like Macy's Inc and Kohl's Corp
-- called "high-low" in the industry. Penney Chief
Executive Ron Johnson tried to eliminate the strategy on the
grounds it cheapens brands and simply creates an "illusion" of
savings for a shopper.
But as he tried to move Penney to an everyday low price
approach, Johnson was quickly confronted with the reality of how
Penney's longtime customers shop: they love a deal and need a
price comparison on a tag to understand they are getting one.
Without it, they'll go elsewhere. And they did.
Last fiscal year, sales fell 25 percent, while the number of
shoppers coming into Penney stores was down 13 percent in the
year ended Feb. 2. Johnson has acknowledged it was a mistake to
get rid of markdowns and coupons.
"While our prices continue to represent a tremendous value
every day, we now understand that customers are motivated by
promotions and prefer to receive discounts through sales and
coupons applied at the register," spokeswoman Daphne Avila said
in a statement emailed to Reuters late on Tuesday.
Penney's private brands include St. John's Bay, jcp,
Stafford and Arizona. They generate more than half of its
An Arizona crewneck T-shirt that had an "everyday" price of
$5 now has a $6 price tag, allowing Penney more room to offer a
markdown and arrive at the same price.
The U.S. retailer began changing the price tags on
merchandise earlier this month and should be done in the next
few weeks, Avila said.
Still, the markups and markdowns will not be as steep as
they were before Johnson became CEO in 2011.
The move was the latest concession Johnson has made. Last
year, he began re-introducing coupons, and in February, Penney
held a Valentine's Day sale. Johnson said in February that
Penney would resume the use of discounts and sales for items
under its own brands but did not elaborate how.
"They continue to have a muddled pricing strategy," said
Craig Johnson, president of Customer Growth Partners, but adding
that the move was needed. "They've got to build the traffic up."
"Everyday low price" is an approach that promises consumers
they will get a low price anytime without having to shop around
or wait for sales. It can lead to steadier, more predictable
demand for products.
Ron Johnson made "everyday low price" the cornerstone of his
plan to reinvigorate the 111-year-old retailer, which also
includes refashioning its 700 largest stores into emporia
holding boutiques for various brands.
Penney will stick with the approach at in-store branded
boutiques, including PVH Corp's Izod and LVMH's
Sephora, because sales are doing well without