J.C. PENNEY CASE ANALYSIS Harvard Case Solution & Analysis


Introduction & Problem Identification

            J.C Penney departmental store is one of the prominent and the oldest retailers of America. The cash balance for the company had declined and the results for the company had been quite variable in the last three years.

            A fair and square pricing strategy had been implemented under which all the sales promotions had been eliminated and this pricing scheme consisted of three tiers. Apart from this, the new pricing structure had changed the layout of J.C Penney departmental store, special lines had been designed by many known designers and many new well known brands had also been incorporated. However, this new pricing strategy was not proving to be successful among the customers who were more accustomed to receiving the circulars which advertised the week’s specials and the cash coupons of JCP. As a result, all customers began to leave the retailers in drove.

            This had increased the pressure on Johnson to turn things around in order to avoid the dissatisfaction of his customers. He had decided to make certain adjustments to the fair and square pricing structure. However, this case requires us to perform that whether Johnson’s efforts were sufficient to turn things around for J.C Penney departmental store and make it the America’s favorite store and whether Johnson’s experience in setting up Apple stores was enough to achieve to all of these goals.


            A detailed analysis has been performed based on the historical results and also on projected figures to analyze performance of J.C Penney departmental store and how the fair and square pricing strategy designed by Johnson was working for the company.

Liquidity Ratios Analysis Q1 2011 to Q4 2012

            The liquidity ratios have been calculated for the last 8 quarters which are shown in the appendix. If we analyze the current ratio of the company first, then it could be seen that this ratio has been following a declining trend for the company in last 8 quarters. This means that the company does not have enough short term assets to pay off the short term obligations if they fall immediately. The current ratio in the first quarter of the year 2011 was 2.1 times which is considered a good ratio for such a retailer but since then, the ratio has been falling and currently, this ratio is 1.43 times at the end of the year 2012. This is a serious and an alarming situation for J.C Penney departmental store and its new CEO.

            Secondly, if we analyze the quick or the acid test ratio for the store then this ratio has also been following a declining trend for the company. The ratio in the first quarter of 2011 was 0.83 times and now it has fallen to 0.52 times that is too low a ratio.  This shows that most of the current assets are illiquid and the working capital management of the company is poor. This is again an alarming situation for the company...............

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