Can J.C. Penney Capture Some of Apple's Retail Magic?

Today, J.C. Penney shares fell nearly 7% after the company announced a cut in its fourth quarter guidance. The company guided Q4 EPS to be in the range of $0.65-0.70 against a prior guidance of $1.05-1.15. Analysts had forecasted EPS to be $1.08 for the quarter. Investors have watched the retailer closely ever since former head of Apple retail stores Ron Johnson took control, hoping that the CEO would infuse some of his creativity into J.C. Penney retail stores. J.C. Penney stores has retained an outdated look for much of the 21st Century, failing to capture a sophisticated look that competitors like Express

and Abercrombie & Fitch

have pioneered. Many consumers do not view J.C. Penney as sexy or cool, two traits that are universally required of most fashion retailers today. Johnson has taken steps to revitalize the product line, signing a contract with Martha Stewart Living

and acquiring the rights to Liz Claiborne. Johnson brought in Michael Francis, one of Target's

former retail gurus to improve the layout of its stores. It has also opened small Sephora stores within its large retail outlets and plans on doing the same with Martha Stewart. This strategy can help bring attention to some of Penney's more popular brands, many of which are unknown to the average fashion consumer. Many retailers have struggled as of late, as customers were extremely selective during the recent Christmas season. Retailers found that very few customers were willing to pay full price, often opting to delay or forego purchases without discounts. Retailers like Penney's have been forced to balance discounting and sales margins, making income growth difficult for most retailers. While high end retailers like Saks

and Nordstrom

have benefited from a cash flush customer base, middle range retailers like Macy's

have struggled to gain the same traction. "The customer is in the driver's seat, they have the power," stated David Bassuk of AlixPartners. "We'll still see aggressive promotions in the next six months." JC Penney is still a retailer in transition. However, the hiring of Johnson will ensure that the company does not go the way of Sears

and be forced to close stores. While the retailer still must overhaul its product line and retail stores, it appears that Johnson is well on his way to restoring the brand to its former glory.