Tell It To Al

Ron Johnson’s spectacular flame-out as CEO of J.C. Penney will likely make for yet another Harvard case study on how not to run a company.

Critics can point to a long list of gaffes from alienating the customers to poor execution.

Harvard business professor Rob Kaplan tells me the retailer simply did not have the cash on hand to take the kind of risks Mr. Johnson’s plans imposed on the enterprise. It’s a common mistake.

Mr. Johnson came into J.C. Penney as the lauded turnaround artists. He’d achieved amazing success at Target and then at Apple at a time when it was rolling out iPods, iPads and iPhones.

Mr Kaplan has also authored a book I think Mr. Johnson might want to read now that he’s got some time on his hands after stepping down from his post. It’s called “What you’re really meant to do: A Road map for reaching your unique potential.”

It’s a good read for anyone who has achieved success only to lose their way.

Click here to ready my column on MarketWatch.

When was the last time you shopped at Sears?

Paul Nathe, a broker with Oppenheimer & Co. in Fiskhill, N.Y., emailed to tell me that his decades-long relationship with the struggling retailer has ended over a poorly performing vacuum cleaner.

“My wife has been replacing her Sears canister vacuum cleaner every 6 or so years since we got married over 44 years ago,” he wrote me in an email. ” She went on line, bought the latest edition, and I picked it up on my way home one night.  She opened it, and ‘tested’ it on the carpet, wood and linoleum floors, and pronounced it not as good as the one she was still using.  So she had me take it back.

“One hour of waiting, chatting with salesmen, seeing zero customers buy anything, I was told that since the box was opened we were being charged a 20% restocking charge.”

Sears is run by hedge fund billionaire Eddie Lampert, who put it together with Kmart in 2005. Lampert became CEO in January, after Louis J. D’Ambrosio resigned citing family health issues. Mr. Lampert has become something of a blue light special, himself, working for just $1 a year. Click here to read more about that from the Associated Press.

The company has been losing revenues for six straight years, critics say it’s not keeping pace with competitors Wal-Mart and Target, and the only plan it has to turn this mess around mainly involves more cost-cutting, which can only diminish the customer experience.

“I went home,” Mr. Nathe wrote. His wife told him: “We just never buy anything from Sears again.”

Last year, J.C. Penney CEO Ron Johnson promised “a year of transformation” after which we would compare the struggling retailer to popular brands like, Apple, Starbucks and Whole Foods.

Last night, he was fired following one of the most unsuccessful stints at the helm of a department store chain in retail history. Click here to read more from MarketWatch.

It was clear to me from the very beginning that he would not succeed, despite his star power as a former top Target and Apple executive. Click here to read the column I wrote last year.

For one thing, he got a big pay plan upfront – valued at $52.6 million for less than two months of work in 2011. Most of it was in stock awards that aren’t going to work out now after a 52% decline in the stock during Mr. Johnson’s watch. He was given every reason to succeed and he still didn’t succeed.

For another thing, it was clear Mr. Johnson’s plans to lure higher-end customers would alienate J.C. Penney’s middle-brow customers. And that’s exactly what happened.

He got rid of coupons and brought in loftier brands – shooing away coupon clippers. He openly targeted the gay community with advertising – a demographic that is not as likely to shop J.C. Penney as the Middle American people who are often opposed to social issues like gay marriage. The move sparked protests among the Christian right, but more to the point, it foreshadowed a huge drop in sales.

All this came on top of an economy that was not recovering as quickly as a lot of people expected it would.

In the end, this guy couldn’t do anything right. But who did J.C. Penney replace him with? Mike Ullman, the CEO who was screwing up J.C. Penney before Mr. Johnson came along and screwed it up more.

As I said nearly a year ago, “This is starting to look like the turnaround at Sears-Kmart, and it could end up looking like the turnaround at Montgomery Ward. “

This struck me as the most absurd business news item of the day: Best Buy’s co-founder and former chairman Richard Schulze “is returning to the company as its Chairman Emeritus.”

Click here to read the official announcement from Best Buy. Best Buy is going to pay Mr. Schulze $150,000 a year to be its chairman emeritus on top of more than $2 million he’s getting for consulting work with the company over the next 12 months. Click here to read the details from Bloomberg.

The heck of it is, he was already chairman emeritus. The term emeritus simply denotes someone who used to have the job.  Click here to read more about what the term means and where it comes from. Usually, there’s a good reason why someone used to have a job. Like maybe his time has past.

Mr. Schulze, 72, stepped down from Best Buy in April after an internal investigation revealed found he did not inform his board about allegations that former CEO Brian Dunn was having an inappropriate relationship with a female employee. Then as Best Buy’s fortunes sagged in the ever-competitive retail world, Schulze announced plans to take over the troubled electronics retailer with a private buyout bid. That bid fell apart earlier this year.

So now, the next big thing for Best Buy is to make him a paid chairman emeritus?

Schulze holds a 20% stake in the company.  You’d think that alone would motivate him to be a productive chairman emeritus.

Let’s say you are on the board of a dying big box retailer.

You know it’s going to die. It’s been dying for a long time. It business model has been completely supplanted by Amazon.com. But luckily, there’s someone crazy enough to buy it before it slides into its final state of retail oblivion. Do you ignore this buyer?

Best Buy’s board should be thanking founder Richard Schulze for his offer to take the struggling company private. Instead, Schulze is running around Wall Street begging analysts for help to influence the board. Click here to read more on that.

I think Best Buy’s board should sell it to him. It’ll be his funeral.

I used to really enjoy shopping at Best Buy.

Earlier this year, I popped into a Best Buy in Boca Raton, Fla., and it was amazing how much had changed. I couldn’t believe how long it took to find store personnel to help me out. I couldn’t believe how disinterested they seemed in selling me anything. I couldn’t believe how  merchandise was just stacked without much thought to aesthetics or even organization.

All of this, of course, is the least of Best Buy’s problems. It seems to be caught in the gravity of a giant black hole.

Click here to read my column in The Sunday Wall Street Journal.

Retail isn’t overbuilt, it’s under-demolished, says Don Wood, CEO of Federal Realty Investment Trust.

There’s plenty of room for growth in areas with high concentration of high-income households. And in areas where there’s not?

Well, they’re not likely to see redevelopment and it’s going to be a long time before they see the wrecking ball, says Wood.

They will likely just get “crummier”  said Wood, “over the next 20 years.”

Retail developers have been able to defy the gravity our our nation’s economic crisis by concentrating in areas that are still doing quite well,  said Wood. As other economies get worse, investment dollars from around the world pour into the U.S. seeking safety.

Where they get a return are the places in the U.S. that are still humming along. Not in areas getting crushed under the slump.

Click here to read my column on Marketwatch.

Ron Johnson’s turnaround at J.C. Penney is in the early stages, but so far, it’s not very promising.

Sales, earnings, traffic – everything – seems to be headed down, according to the company’s latest financial report, and now the stalwart department store chain faces serious headwinds from a slowing economic recovery.

Johnson, a former Apple executive and longtime retail executive, is trying to hold on to Penney’s traditional, bargain seeking-customers, while trying to appeal to new customers. In doing this, he risks alienating his existing middle-American customers.

If  Penney’s latest  financial report is any indication, Johnson has frightened off customers by getting rid of sales and coupons. At the same time, he is stepping into a culture war, marketing to the gay and lesbian community. It remains to be seen whether members of the gay and lesbian community will rally around Penney in sufficient numbers to offset those boycotting Penney. It is yet another big risk Johnson is taking that may not pay off and indicative of the kinds of bold moves Johnson is willing to make.

Frankly, despite Johnson’s impressive retailing  background, I’m not sure he’s going to pull this one off. Penney may be stuck in a model it created long before Johnson came along, and the economy may be going against it in  a big way as Johnson tries to transform it.

Click here to read my column in The Sunday Wall Street Journal.

How many ex-retailers can you even remember?

Linens ‘N Things, Computer City, HomeBase, Musicland … Montgomery Wards.

Retailers have been killing each other for a long time, but now they have a more efficient way to do it: The price comparison app.

Click here to read my column in The Sunday Wall Street Journal.

Anthony Hardwick, who rounds up carts in the parking lot at a Target in Omaha, has well over 150,000 signatures on the petition he started on change.org to roll back Black Friday from midnight to 5 a.m.

“”A midnight opening robs the hourly and in-store salary workers of time off with their families on Thanksgiving Day,” his petition reads.  “By opening the doors at midnight, Target is requiring team members to be in the store by 11 p.m. on Thanksgiving Day. A full holiday with family is not just for the elite of this nation — all Americans should be able to break bread with loved ones and get a good night’s rest on Thanksgiving!”

But Hardwick has nothing to complain about, if Target’s official response is any guide.

“The team member you are referencing is not now, and has never been, scheduled to work on Thanksgiving or Black Friday at Target,” Target spokeswoman Molly Snyder said.

Hardwick, as well as officials at change.org, however, insist Hardwick was slated to work on those days, and has yet to hear otherwise from his employer, except in the press. And Hardwick has all along said he’s  taking his stand for his co-workers, not himself.

Black Friday is now officially insane, with midnight openings following Turkey Day. But 34% of consumers say they plan to shop on that day, up from 31% last year, according to a survey by the International Council of Shopping Centers  and Goldman Sachs.

Click here to read my column about Hardwick on MarketWatch.