Back in October, J.C. Penney Co. hired Michael Francis away from Target Corp. with great fanfare, saying he had the "vision and courage" to turn around the department store chain. On Monday, Francis was out, the highest-level casualty of Chief Executive Ron Johnson's sputtering effort to wean customers off an endless stream of discounts.
As president, Francis was responsible for marketing and for getting Penney's product lines together—a pivotal merchandising job as Johnson sought to lure customers in with better clothes at everyday low prices.
But in mid-May, the company reported a larger-than-expected $163 million loss on a 20% drop-off in sales. Francis's abrupt departure is a acknowledgment that the new strategy hasn't caught on.
Now, Johnson—who won plaudits for setting up Apple Inc.'s sleek retail operation—will oversee marketing and merchandising himself.
During an investor meeting in May, Johnson said customers were confused by certain parts of the company's new strategy, such as "best price Fridays," the company's term for its twice a month sales. He said customers thought the sale lasted just one day, when in reality it was to last through the weekend until the merchandise was sold. Citing "miscommunication," he said the company had begun to think about marketing the sale days more clearly.
While it is still early in Johnson's effort to remake the department store chain, the buzz that surrounded his arrival and early announcements has faded as the scale of his challenges has become clearer. Penney's shares—which soared a year ago on word that Johnson would come on board, have dropped 27% since mid-May. To conserve cash, it has cut its dividend.
Shares fell another 5.9%, to $23, late Monday after Francis's departure was announced.
J.C. Penney declined to make Francis available for comment.
His brief stint will have been lucrative for the departing executive: Francis will have collected more than $15 million in salary, sign-on bonus and severance payments, according to a person familiar with the matter.
The company isn't giving up on Johnson's pricing strategy, another person familiar with the matter said, although some on Wall Street said the blame had been misplaced.
"Since Ron Johnson was unlikely to fire himself due to early turnaround missteps, he appears to have decided to swing the axe over the head of the person he handpicked as president of JC Penney," Brian Sozzi, an analyst at NBG Productions, said in a note to clients.
Shoppers who have been trained to seek out markdowns balked when Penney ratcheted down sticker prices yet looked for people to buy at full price most of the time. The retailer also pulled back on circulars.
Executives including Johnson have continued to defend the strategy, blaming the sales decline on poor marketing.
Early on, Francis had focused on atmospheric ads in an effort rebrand the 110-year-old department store. Penney's logo was changed to a square around "JCP" to represent what it calls "fair and square pricing." Brightly colored television spots featured snippets of Americana set to catchy music but offered little detail on products or pricing.
The devastating first-quarter results made clear the approach wasn't working and that the ads needed to do more to teach consumers about the discounts and prices they could expect, one company executive said.
Johnson, who himself had worked at Target, had until recently lauded Francis. In an interview in January, Johnson referred to Penney's "dream team" — Francis, Chief Operating Officer Michael Kramer and himself. "We've all been lucky and have only had winning experiences," he said.
This story first appeared on WSJ.com.