Even though his strategy a few years ago to reinvent J.C. Penney (JCP) sent the department store chain’s annual sales down $6 billion and caused a major cash crisis, former CEO Ron Johnson maintained on Monday that the retailer would have been better off sticking to his plan.
Johnson, previously a star retailer at Apple (AAPL) and Target (TGT), was hired by Penney in 2011 to great fanfare, given a mandate by investors like hedge fund titan Bill Ackman to radically overhaul the department store chain. He did that by getting rid of its discounting culture and beginning to refashion its stores as collections of boutiques for hip brands like Jonathan Adler and Michael Graves (brands that Penney has since dropped). He launched his redesign without the advance testing that’s a standard practice in retail.
His plan failed miserably. On Johnson’s watch, J.C. Penney annual sales fell from $17 billion to as low as $11 billion, the company fired 40,000 employees and shares fell to alarming lows. The retailer has since closed dozens of stores and sold off assets to build up cash reserves as it grapples with a big debt load.
Speaking at the Shoptalk conference in Las Vegas on Monday in his most expansive public comments to date about the Penney debacle , Johnson largely blamed the company’s stagnant culture for the failure, saying people there were entrenched and resisting him.
“When I got to Penney’s, I had no choice because I was told people wanted change, but the truth is nobody wanted change,” he said, though he did concede that he proceeded far too quickly. “The team there was very comfortable with their place in the market.” For a detailed account of Johnson’s 17-month tenure as Penney CEO, please read this 2014 Fortune feature.
In early 2012, Penney jettisoned most of its couponing and discounting from one day to the next, angering frugal long-time customers without winning over new ones. And the retailer proceeded to quickly and expensively re-configure hundreds of stores.
Johnson was out by April 2013, after it the board began to fear his strategy could fell the now-114-year- old retailer. Penney spent the next two years repairing the damage, and largely reversing his strategy. (Indeed, Penney now sells some items in stores for one cent.) In 2014, it hired former Home Depot executive Marvin Ellison as president, and last year it made him CEO.
As detailed in a Fortune feature this winter, Ellison’s strategy has been to fix Penney’s e-commerce, improve supply chain management and have the store be the best version of itself.
That has paid off, giving Penney comparable sales growth in 10 of the last 11 quarters. Still, annual sales remain about 35% below 2006 all-time highs, and as Penney’s comparable sales decline last quarter pointed out, the recovery is fragile.
While Johnson said on Monday that he went way too fast, he maintains Penney should have stuck with his strategy. (Arguably, it has to some degree: The store recently introduced boutiques within a store for plus-sized clothes, introduced areas for home appliances, and expanded its in-store Sephora beauty shops.)
“I still think if we had continued on, the company would have been a lot better than this painful u-turn where they’re trying to find growth from a new baseline,” Johnson said.
On the bright side, Johnson said his mistakes at Penney have served him well as he builds up his new venture, Enjoy, an in-home technology concierge. He noted that because people who have failed will work harder to avoid it again, his Enjoy investors liked his failures at Penney. There were plenty to like.