J.C. Penney's new strategy includes major markdowns

By Shan Li

Jan. 25, 2012 12 AM PT

After a poor holiday season, department store chain J.C. Penney Co. is revamping its strategy by permanently slashing prices on products by at least 40% and retooling its store format.

Chief Executive Ron Johnson announced in New York that the retailer would adopt a simple pricing model and do away with the hundreds of sales it has sprinkled throughout the year. The three-pronged strategy involves reducing prices on all merchandise, offering monthlong sales on select products and clearance deals on the first and third Fridays of each month, the Associated Press said.

The stores themselves will also change. Penney will continue to create distinct retail spaces within its stores that feature different brands, a strategy it has already adopted with its mini-boutiques for cosmetics maker Sephora and displays for fashion brand M by Mango.

Penney has suffered in recent years as the recession slammed its middle-income customers and shoppers turned to trendier rivals such as Macy’s and Target. The retailer struggled during the crucial holiday season and resorted to large discounts to attract customers and clear its shelves.

Ron Johnson, formerly an executive at Apple Inc., took the helm in October as Penney’s chief executive.

Since then, Johnson has been shaking up the retailer. In October, Penney spent $267.5 million to buy Liz Claiborne brands and fashion-jewelry brand Monet. Last month the company acquired a 16.6% stake in Martha Stewart Living for $38.5 million.

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