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Wednesday, May 16, 2012, 04:32 pm PT (07:32 pm ET)

Former Apple retail chief under fire as JC Penney stock plummets

With a little over six months on the job as JC Penney's chief executive, former Apple senior vice president of retail Ron Johnson is already seeing criticism of the major overhaul he designed for the ailing department store chain as a recent earnings call revealed substantial losses.

After leaving Apple in November 2011 to take the reins of the huge department store, Johnson looked to increase margins with the introduction of a new pricing model and unique retail ideas like the store-within-a-store, but customer response to the efforts fell flat, reports Reuters.

During its first quarter 2012 earnings call on Tuesday, JC Penney reported higher than expected losses with a 20.1 percent sales drop year-to-year causing shares to free fall 19.7 percent, the worst decline since the company began listing shares in 1929. The selloff erased $1.43 billion in market value and was the catalyst for a suspension of the stock's quarterly dividend of 20 cents per share.

JC Penney shares closed down $6.57 on Wednesday to end the day at $26.75, well below the $30.11 closing price seen the day before Johnson was named CEO in June 2011.

The company is in the midst of a multi-year plan to reinvigorate sales, though some analysts see the change as being largely ineffective. Spearheaded by Johnson, the new strategy involves the replacement of coupons and sales with "Every Day" low prices.

On Tuesday, Johnson told analysts that he stands by the changes but admits that JC Penney hasn't been successful in exposing customers to the new plan's benefits.

"It is not doing the hard work we need it to do right now," Johnson said of the company's advertising.

Previous commercials featured Ellen DeGeneres in attempt to contemporize the brand's image, but that effort was confused by a switch to ads dubbed "Do the Math" which illustrate how the chain's low prices outperform coupons and sales.

Johnson JCP

Ron Johnson at JC Penney's 'fresh air' event. | Source: JCPenney


Critics attribute the recent lack of foot traffic to the abrupt change in store policies, and claim that JC Penney customers who have become accustomed to the coupon and sale model are put off by the new "Every Day" pricing strategy.

The second step in Johnson's multi-pronged makeover will happen in August when the company's first store-within-a-store is opened. Upon completion, the transformation will put a number of 100 name brand boutiques in each JC Penney location. Announced designer collaborations include Vivienne Tam, Betsey Johnson and Michael Graves.

During his tenure at Apple, Johnson was responsible for the creation of the Apple Retail Store, which is a main component of the iPad maker's success and generated $4.4 billion in the last quarter alone.