David Brancaccio: JC Penney stock is currency down about 17 percent after the company reported that customer traffic is down; sales are down; and the quarterly loss was bigger than expected. The company had hired Ron Johnson, the man behind Apple Stores, to make JC Penney more fashionable. Many prices are lower but there are fewer temporary price cuts.
Paul Swinand monitors JC Penney at Morningstar. Mr. Swinand, good morning.
Paul Swinand: Good morning.
Brancaccio: So things are taking a while to turn around here at JC Penney?
Swinand: Well, yeah -- I think that people should have been expecting a sales decline. I mean, don't forget they rolled back prices -- in some cases, 40 percent. And existing customers wouldn't necessarily understand that the change had taken place if they hadn't seen the new advertising.
Brancaccio: So we're at a point where some of the changes are really just being wheeled in, and the customers are beginning to feel them -- so maybe a little too early to judge the success or failure of the changes?
Swinand: Yeah, and I actually was sort of a Johnson skeptic when he was first hired, and I was really impressed with some of the stuff they've done already. Retail turnarounds are typically a big challenge. But I do think this is actually going to succeed, so as the stock gets cheaper, I get more excited because that's an opportunity for investors.
Brancaccio: So you can see the change if you go into one?
Swinand: Yeah you really can. The store looks a little different; it's less cluttered; there are obviously less "for sale" signs. I even think they've changed the music -- they've made it a little hipper and they've turned it up a little louder.
Brancaccio: That's a shame, actually -- I used to go to JC Penney for my Muzak.
Swinand: You're probably actually the new target, whereas you might not have been the old customer-target. But you've got to change with time; you've got to keep reinventing yourself and getting new customers or you might stagnate with you customer base as they get older. And I think that's part of the problem.
Brancaccio: All right, Paul Swinand at Morningstar, thank you very much.
Swinand: Thank you.