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Store-level layoffs hit J.C. Penney

Excerpt

The following ran on the May 7, 2012, edition of Pegasus News. Economist Michael Davis provided expertise for this story.

May 10, 2012

By Bill Conrad

The latest round of layoffs to hit J.C. Penney came last Wednesday, when the retail giant announced store-level layoffs. The move was announced a month after 600 employees were laid off at the Plano headquarters. Additionally, a call center in Pennsylvania will be closed this summer, eliminating 300 more jobs.

The company hired former Apple executive Ron Johnson as its new CEO in November, and is in the middle of re-branding itself, a move that was necessary after the company's stock fell nearly 54 percent over the past five years. Johnson announced in January he hoped to reduce costs by $900 million by the end of 2013, including $200 million from its Plano headquarters.

A company spokeswoman said the new business model has made some layers of management unnecessary....

Mike Davis, an economics professor at the SMU Cox School of Business, said J.C. Penney found itself in the situation it is currently in due to its inability to adapt its aging business model.

"What we are seeing at Penney's is a reflection of what we are seeing in the retail sector, that is change," Davis said. "It was good marketing decisions for the past that caused their stock to go up. Penney's was a very profitable and successful company for a very long time. It isn't that they made bad decisions, it was more that the model that worked for them for 80 or 90 years really was no longer the right retailing model."