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DéjÀ vu: Sales back at Penney’s

Retailer reverts to proven strategy

– J.C. Penney is bringing back sales.

The struggling department store chain this week will begin adding back some of the hundreds of sales it ditched last year in hopes of luring shoppers who were turned off when the discounts disappeared, CEO Ron Johnson said.

Penney also plans to add price tags or signs for more than half of its merchandise to show customers how much they’re saving by shopping at the chain – a strategy used by a few other retailers. For store branded items such as Arizona, Penney will show comparison prices from competitors.

The moves are a reversal for Penney on the eve of the one-year anniversary when it vowed to almost completely get rid of the sales that Americans covet but that cut into a store’s profits. The idea was to offer everyday low prices that customers could count on rather than the nearly 600 fleeting discounts, coupons and sales it once offered.

The bold plan has been closely watched by others in the retail industry, which commonly offers deep discounts to draw shoppers.

But so far the experiment has served as a cautionary tale of how difficult it is to change shoppers’ habits: Penney next month is expected to report its fourth consecutive quarter of big sales drops and profit losses. After losing more than half of its value, Penney stock is trading at about $19. And the company’s credit ratings are in junk status.

Johnson, who rolled out the pricing plan shortly after taking the top job in November 2011, insisted the latest moves are not a “deviation” from his strategy but rather an “evolution.”

“Our sales have gone backward a little more than we expected, but that doesn’t change the vision or the strategy,” says Johnson, who previously masterminded Apple Inc.’s retail stores and Target Corp.’s cheap chic fashion strategy. “We made changes and we learned an incredible amount. That is what’s informing our tactics as we go forward.”

But critics say that Johnson is backpedaling. Walter Loeb, a New York-based retail consultant, says Johnson “is now realizing that he has to be more promotional to attract shoppers.”

When it was rolled out in February 2012, the plan entailed permanently slashing prices on everything in the store by 40 percent. Instead of the 600 or so sales and coupons it used to offer, Penney decided to have just 12 monthlong sales events on some merchandise. And there would be periodic clearance events throughout the year.

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