Best Buy and JC Penney: A Tale of Two Turnarounds

The electronics store is doing great. The clothing store, not so much.

This morning, department store chain JC Penney, which has been floundering since the departure of CEO Ron Johnson, reported a 12% earnings slide and a $586 million loss in the second quarter. Electronics chain Best Buy, on the other hand, reported a jump in earnings of $266 million, compared with just $12 million in this period last year. The market's reaction made Best Buy the best performing stock in the S&P 500 this year.

Both companies have been on turnaround probation of late, struggling in a tough retail marketplace, their management being used as case studies of what not to do.

What has Best Buy managed that JC Penney hasn't?

They've cut costs: Slashed them, actually: $390 million in 9 months, on their way to a goal of $725 million, partly by closing underperforming stores and reorganizing their supply chain.

Price matching is working for them: They've been aggressively matching Amazon and other competitors' prices. JC Penney has had a confused discounts/no discounts policy.

They've gotten online right: With a 10% increase in revenue ahead of a site relaunch planned for next year. JC Penney's web traffic is falling.

Pop-up stores featured strong brands: Best Buy is seeing a lot of sales from Samsung Experience Shops and Windows Stores-within-stores. JC Penney's pop-up shops, featuring less well known names like Joe Fresh and Jonathan Adler, have been less successful.

[Image: Flickr user Mike Kalasnik]

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