JC Penney's Ron Johnson Capitulates, Uses Word "Sale"

This morning, CBS

reported

that JC Penney's

CEO Ron Johnson has now decided to resume use of the word “sale.” With JC Penney reporting a

last month, the company is struggling to grow its revenues. The quarter contained $53 million in inventory markdowns, likely meaning that JC Penney was not able to sell the marked-down goods at full price. Additionally, Fitch

on JC Penney today, suggesting the company is facing mounting pressures to improve its financial situation or else risk reducing its ability to tap debt markets. In Johnson's previous position as Senior Vice President of Retail Operations at Apple

, he watched iPads fly off of shelves. More so than Apple, however, JC Penney has released products that fail to resonate with customers. This failure is likely due, in part, to the fickle nature of fashion trends. The word “sale” is essential to selling JC Penney's failed products. Beginning to use the word “sale” could be good for JC Penney's near term profit and revenue, by getting consumers excited to purchase goods that might have otherwise lain dormant. JC Penney has been running de facto sales, but beginning to use the word “sale” is more obvious to consumers. Using the word "sale" could, however, be a negative signal to investors about JC Penney's long term outlook. Johnson's implied belief that using the word “sale” is inevitable could be a signal that JC Penney will face long term issues adequately forecasting fashion trends. Sales do not solve the underlying problems of JC Penney's clothing selection processes. Johnson's use of the word “sale” should help JC Penney bring consumers into its stores and sell its less desirable products. But it won't prevent JC Penney from acquiring these less desirable products in the first place– a more secular concern. Shares of JC Penney were trading close to $0.69 or 2.8% higher for the day.