CEO Says New Penney’s Will be a Store for Everyone

Making a rare appearance in Dallas tonight, J.C. Penney Co. CEO Ron Johnson talked more about his time at Apple and Target than about his ambitious plans for transforming Plano-based Penney’s into “America’s favorite store.” but during his SMU Management Briefing Series talk, Johnson (pictured) did offer a few hints about how he hopes imagination, innovation, and hard work will jump-start the venerable, 110-year-old department-store chain.

The new Penney’s, Johnson said, will be a store for everyone, not just middle-income shoppers. It will sport a “new retail interface” of some undisclosed, revolutionary sort. It will offer “fair and square pricing.” It will have unmatched merchandise and great personal service. And it will be a place to belong — a place that “cares more about me than about the clothes I buy,” he said.

Johnson added that an all-new store design will be in place in 2013, including here in Dallas, but that he expects this year to be the most difficult one for the company “perhaps in decades” because of all the changes.

CEO Says New Penney’s Will Be a Store for Everyone

J.C. Penney (JCP), the fourth largest US department store chain, is undergoing a transformation and brought in Ron Johnson, the ex-chief of stores at Apple (AAPL), to revive its business.

J.C. Penney scheduled an analysts’ day on Jan. 26, 2012. The stock had been levitating for a couple of months in anticipation of Johnson making a great presentation. By almost any measure at $33, J.C. Penney was one of the most expensive major retail stocks.

On Jan. 25, Johnson made the rounds and leaked his plan ahead of the big event on Jan. 26. J.C. Penney will in the future be known as jcpenney. There is a new logo to evoke the image of the American flag. The stores will have a number of small boutiques as opposed to rows of racks. Most importantly, J.C. Penney will introduce a simplified promotion and pricing structure.

J.C. Penney also plans to cut a large number of jobs and save $900 million over the next two years.

‘Buy the rumor, sell the news’ is a dictum often followed on Wall Street.  when the stock did not go up after Johnson made the rounds, short sellers aggressively sold the stock short on Jan. 25.  nine out of 10 times this technique is profitable.

On Jan. 26, every time the stock would fall as it should have, one or more buyers would aggressively buy it and run up the stock. This is a common technique used to cause a short squeeze. Watching this buying, short sellers started buying to cover generating upward pressure on the stock. The higher the stock went, the more short sellers had to cover — the classic short squeeze.

When the company announced at the analyst meeting that it may meet or exceed earnings of $2.16 per share, it was like pouring gasoline on a fire.  The consensus estimate was for earnings of $1.61.  The news accelerated the short squeeze.

In two days, the technique of leaking the plan the day before and withholding the information on increased guidance until the Analysts Day caused a massive short squeeze adding about $1.5 billion to the stock value of J.C. Penney.

Is Ron Johnson so extraordinarily smart in understanding the mechanics of the stock market to add $1.5 billion to Penney’s market capitalization in two days, or was it simply an accident?  We’ll probably never know.  after all, he is an ex-lieutenant of Steve Jobs of Apple.

It is likely that the people who engineered the short squeeze have already taken profits.  as J.C. Penney starts the transformation, it will be interesting to see what its competitors such as Macy’s (M), Kohl’s (KSS), Target (TGT), Dillard’s (DDS), and Sears (SHLD) do to counteract J.C. Penney’s new plan.By my estimates using the ZYX Change Method, the probability of success of this new plan is better than 70% in the long-term, but there are high risks in the short-term.  There will be plenty of opportunities for investors to generate wealth as the transformation war starts.

About Me: I am an engineer and nuclear physicist by background, have founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Reportwhich publishes four newsletters to help investors profit from change. Write me at Nigam@TheAroraReport.com.

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Full disclosure: I, my hedge fund, and subscribers to The Arora Report are long Apple from an average of $131 and took profits on 50% of the position at an average price of $360. Subscribers to ZYX Buy Change Alert may have a similar position and may have taken similar actions.  we also have a position in JCP to take advantage of the short squeeze.

Steve Jobs’ Ex-Lieutenant Adds $1.5 Billion To JCP In Two Days

Tim Cook taps John Browett, CEO of Dixons, to head his retail empire

Ron Johnson, the former Target (TGT) whiz kid who built more than 300 Apple Stores for Steve Jobs, left a gaping hole in Apple’s (AAPL) management team when he departed last year to run J.C. Penney (JCP). During his seven and a half years with the company, Johnson’s stores became Apple’s public face — clean, well-lighted places where customers were invited to play with the newest toys, surf the Web, check their e-mail and bring their problems to the Genius Bar.

It was a measure of how hard it was to fill Johnson’s shoes that it took Apple seven and a half months and the services of an international headhunting firm to find a new chief of retail.

They found him, of all places, at Dixons, a depression-era photography studio that took its name randomly from a British telephone book and grew through a long series of acquisitions to become one of the world’s largest consumer electronics retail chains, selling everything from cameras to washer dryers across Europe.

John Browett, Apple’s new senior vice president for retail, had been Dixons’ CEO since 2007 and is credited with helping move it into the digital age, getting rid of analog TVs in 2008, lining up hot new products (securing exclusive rights to the iPad in 2010), and rebranding its service operations with “The Tech Guys” and the KNOWHOW format.

Dixons’ shares fell as much as 13% Tuesday on the news that Browett was leaving.

“Our retail stores are all about customer service, and John shares that commitment like no one else we’ve met,” said Tim Cook in Apple’s press release. “We are thrilled to have him join our team and bring his incredible retail experience to Apple.”

Some Brits who have shopped at Browett’s stores were not so thrilled.

Jonathan Margolis, who advises wealthy readers what technology to buy in the FT’s How to Spend it magazine, tweeted: “#Apple has hired bloke from Dixons to run retail. Tim Cook very excited about this as he’s mr Customer Service. has he been to a Dixons?”

Browett will supervise the expansion of Apple’s 361-store retail chain. in its last earnings statement, the company reported that its stores generated $6.1 billion in the December quarter, bringing in an average of $17 million per store.

A new boss at the Apple Store