Conclusion: Apple's retail head would be positive for JCP. But these two companies could not be more different as it relates to content, consumer connectivity, and financial management. Any great retail ideas from here are likely to take down margins -- a lot -- before they go up.
I’m not saying that the guy is not a retailing genius, but when you have the best content in the world, no competition, a customer that has no price boundaries, and an unlimited SG&A budget, it does make it a bit easier to be a ‘visionary’.
JC Penney, on the other hand, has some of the worst content (over-indexed to mid-tier private label), endless competition, a cash-poor customer, and the most limited SG&A budget in retail. I don’t care if you took the equivalent of what Sam Walton was to retail when he founded Wal-Mart in 1962…if you don’t deploy capital, you can’t grow.
Look at JCP over time. Can anyone explain to me how JCP grew square footage by 12% over the past 8 years (after they sold Eckerd to CVS), but held SG&A flat at $5.7bn? This thing has been cut bone dry. Opportunities to cut more costs to improve margins are extremely slim. It needs to invest in SG&A, Capex and the right working capital (which is tough to do without the R&D/marketing [i.e. SG&A] to back it) in order to turn JCP around. All of the ‘retailing 101’ best practices have been put in place.
I cannot imagine that anyone coming in from a place as high-profile as Apple with such a wide-open checkbook would come into JCP and not demand the same.
Heck, maybe Mr. Johnson a retailing god, and he does things in a way that none of us can imagine (a la Apple). But it won’t be without taking JCP’s margins down – by a long shot – to make it happen.
