Johnson, who says the company will now show the suggested price of clothing and other manufacturers on price tags alongside Penney's price, doesn't seem to be panicking. In a meeting with analysts following the release of the company's results, he chalked Penney's poor performance up to a learning experience.
"This was another quarter of unbelievable learning for us at J.C. Penney," he says. "Each quarter, we learn a lot, we adapt, we try to move forward."
THE STORE OF THE FUTURE
Some critics say Johnson's plan is falling apart because he chose to overhaul pricing before working to improve Penney stores. Indeed, Penney stores have long been seen as unappealing and it's merchandise as dowdy.
But Johnson says the focus on pricing was no mistake. One of the men he has admired most in his life was Steve Jobs, co-founder of Apple and his former boss. He says Jobs taught him the importance of doing things well "one at a time" and "not getting ahead of yourself."
Johnson, who wears khakis and jeans to the office most days, says he knew he wanted to bring in hip names like Vivienne Tam and Joe Fresh to Penney. But those brands, Johnson reasoned, wouldn't put their wares in stores as long as Penney offered hundreds of sales each year.
"Nobody is going to put their brand in a place (where) they'll devalue it or take 50 percent or 60 percent off and sell it on coupons," he told investors in September.
With pricing in place, Johnson shifted his focus to Penney's stores and merchandise. This fall, Penney began replacing nearly half of its merchandise in stores with new lines like Betsey Johnson's Betseyville, which features trendy items such as $45 leopard print platform pumps and $24 lace rompers.
To showcase Penney's new merchandise, Johnson also reimagined its stores into mini malls of sorts. He plans to divide stores into 100 shops that highlight different brands or types of merchandise. Each shop will be like its own small store, with different merchandise and signage.
Surrounding the shops will be extra-wide aisles that Johnson calls "streets." Along those pathways will be ice cream and coffee bars and wood tables with built-in iPad tablet computers that shoppers can use to surf online. In the middle of it all, a Town Square will offer activities like Pilates.
Johnson says the stores, which will carry about 25 percent less merchandise, will be places where shoppers can hang out. The hope is that the longer they stay, the more they'll buy.
Penney already has started the remake of its stores. In recent weeks, ten shops have been launched for such brands as Liz Claiborne, Levi's and Penney's new JCP line of casual clothes in 700 of its 1,100 stores. Johnson aims to have 100 shops in those 700 stores by the end of 2015. The remaining 400 stores are in small towns and won't feature the full makeover.
In September, Johnson took 300 analysts and reporters on a tour of a 30,000-square-foot prototype of the complete Penney store of the future, which Johnson calls the "art studio." He says he likes to stop by the prototype, on the third floor of a Penney store in a Dallas mall minutes from Penney's headquarters, before he goes to work each day.
Penney is starting to see some positive results from the makeover it began. The company says so far that it has converted about 11 percent of the floor space to shops-within-stores. The shops' average sales are more than double the sales in the rest of the store.
And some customers are beginning to come back. Michael Pelaez, a 27-year-old who rarely shopped at Penney before the new shops opened, says he likes the retailer's new Levi's shop and its predictable pricing. "It's forcing me to browse," says the pharmaceutical supplier worker who lives in Hialeah, Fla. "What used to be an hour and a half at the mall has turned out to be an hour and a half at J.C. Penney."
That some customers are responding to the redo is no surprise to Johnson, who insists his plan will work. "It's really hard to transform things," he says. "But that's what we're going to do."