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Best Buy and JC Penney: A Tale of Two Turnarounds

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

Best Buy and JC Penney: A Tale of Two Turnarounds

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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