Why did Mike Ullman decide to change the age-old culture at JC Penney (JCP) just after a successful turnaround?

JCP was originated by a dry goods and clothing store in 1902. In 1907, Penney bought the stakes of his partners and concentrated on expanding the number of stores. The JC Penney Company was incorporated in 1924 and it had been running successfully. Until 1990s, the expansion model had started to show up problems. When competitors were going in for centralized merchandising and inventory systems, JCP was still using a decentralized system of purchasing which resulted in stretched out lead times. JCP was no longer perceived as different from its competitors. Its financials and share prices also plummeted.

Luckily, between 1999 and 2004, there was a turnaround in JCP. It was orchestrated by Castagna and Questrom, who joined JCP as COO in 1999 and as Chairman and CEO in 2000 respectively. They were the first outsiders to join JCP in their respective positions. Turnaround occurred in aspects below:

1. To centralize the buying activities and revamp the stores, funds were needed. The funds were raised through the sale of JCP’s Direct Marketing Services (DMS), which sold insurance and travel and auto club programs. It led to significant working-capital improvement.

2. JCP has also closed down 120 outlets that were not performing well. It generated an increase in free cash flow.

3. Ad campaigns were launched and the stores were given a face-lift. New designers were brought in from the competitors. JCP also dealt with apparel makers like Bisou Bisou, to exclusively sell its merchandise at JCP. It also came out with private labels like The Havanera Co., range of men’s contemporary casuals targeted at Hispanic males. JCP has made significant efforts to project a fashionable image of the company to target audience.

4. After the sale of the Eckerd