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'Clearance' makes a comeback at JCPenney

NEW YORK — JCPenney is changing its pricing — again.

Just six months after the mid-priced department store chain got rid of the hundreds of sales it offered each year in favor of everyday lower pricing, it is reversing course.

JCPenney on Feb. 1 began using a three-tier pricing approach that called for lower everyday prices, monthlong sales and periodic sales events. Starting Wednesday, JCPenney will eliminate one of the tiers and bring back the word "clearance." The company also plans to tweak its advertising to better communicate the pricing plan to customers.

The moves come at a time when shoppers — and investors — are growing increasingly confused with JCPenney's pricing strategy, which was spearheaded by new CEO Ron Johnson when he took the helm in November. In May, JCPenney's stock plunged nearly 20 percent in its biggest decline in four decades after the retailer posted a larger-than-expected quarterly loss and a 20 percent drop in revenue on poor reception from shoppers for its pricing strategy.

The change also calls into question how patient Main Street and Wall Street will be with Johnson, a longtime retail executive who was brought in with high hopes that he'd transform JCPenney with the same magic he used to make Apple's stores and Target's cheap chic strategy successful in his previous roles at those companies. The pricing strategy is a tough sell to shoppers who have come to expect deep blockbuster deals and investors who are looking for JCPenney to turn around its business quickly.

Under the new system, JCPenney is keeping "Every Day" low prices that are consistently 40 percent lower than regular prices before the company eliminated sales. It also will keep periodic sales but will change their name from "Best Price" to "Clearance." And it will get rid of "Month Long" deals.

To go along with the new pricing, the company will tweak its ads. That will include inserts in newspapers every Friday during the back-to-school season that will highlight specific products like jeans. A TV ad will tout free haircuts that the stores will offer students during the back-to-school season.

JCPenney, based in Plano, Texas, is hoping the tweaks to its pricing plan and advertising will help stem growing concern about whether Johnson's plan will help the retailer turn around its business.

Investors, who had sent shares soaring 24 percent to about $43 after Johnson announced the pricing plan in late January, have pushed shares down about 37 percent since Jan. 1.

'Clearance' makes a comeback at JCPenney 07/26/12 [Last modified: Thursday, July 26, 2012 8:30pm]
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