(Photo Credit: Wiki Commons)
Ah the joys of Finance 3014! I am currently finishing up my junior year of college and must say that finance was... hmm, an interesting class. For all of those who have taken the class, there is one major financial relationship that you learn about: The "dedicated marriage" of Mr. and Mrs. Risk and Return. In this lovely relationship there is no divorce, separation, cheating, or even the casual "lets take a break," it is pure equality resting on a base composed of unpredictability. Equality, in the sense that the more risk you take, the more your expected return; and unpredictability, meaning that we do not know for a fact the return that our risk will yield. Without the base of unpredictability, risk would cease to exist and with that, the possibility of great returns.
Normally, when people think about risk takers in big business, they think of the major innovators such as Steve Jobs, or Donald Trump even. But it is not always that these risk takers get the return that they are expecting. One recent story in in the media that has really caught my attention is the triumphs and trails of JcPenny, and its late cheif executive of 17 months Ronald B. Johnson. When looking at the JCP stock prices from the last year, which have fallen from approxiamtely $35.67 to nearly $16.00 here recently (Check them out here), it is evident Johnson's reliability on Mr. and Mrs. Risk and Return may not have paid off as he expected. According to The NY Times Johnson's planned to turn JCP into a "shopping wonderland with designer boutiques and stable prices instead of coupons." This of course is a giant aspiration filled with all kinds of risks, in which I think Mr. Johnson did ( or began to do) a number of things right. For instance he took sales personnel off of commission, and created a plan that focused on the long term success and stability of the company (read more here). Unfortunately, it seems his plan did not yield the return quickly enough, or even at all, which we may never know due to his speedy release.
Being the avid shopper that I am, I must admit that I am thoroughly pleased with the change JcPenny has exhibited on the storefront side. I enjoy the few "boutique" sections of the store that were incorporated such as Sephora and Mango. I also find my shopping experience there to be more relaxing and enjoyable. Even their television ad campaigns have sparked my appeal. I am very eager to see where JcPenny plans to go from here and what the future holds for their stock and its return.
What do you think about JcPenny? Was Ronald Johnson's risk to high, and his plan too longsighted for the company to yield great returns? Why do you think JcPenny has struggled to improve its value as a company? Please share your thoughts, inputs, and comments below.
Update: I Ironically just saw this ad on tv and found it to be an interesting plea to shoppers. Never seen a marketing campaign appeal to customers by admitting to "mistakes" and pleading for a second chance. Check it out! What do you think about it?
