American Apparel CEO: This Is How I Would Have Run JCPenney (JCP, APP)

American Apparel CEO Dov Charney was in New York recently and we got a chance to speak to him.
We wanted to know what he would do to fix JCPenney.
Don’t laugh, there are similarities between JCP’s situation and AA’s.
Like JCP now, AA’s sales a couple of years ago were in a downward spiral. Like JCP, the company was losing cash and needed a ton of new financing to avoid bankruptcy. And, like JCP, AA’s ads alienated a lot of the hipsters it relied on as customers (although for different reasons).
Charney, of course, engineered a turnaround at American Apparel and the company is now profitable and growing topline sales. Notably, he did so without changing or rebranding the company. (Mostly, it involved closing unprofitable stores and bringing out a constant stream of new products.)
“I think they should have stuck with the course,” Charney says, referring to JCP’s strategy — constant discounting and sales promotion — prior to the arrival of CEO Ron Johnson in 2011. Johnson recently resigned following a 30% collapse in sales.
Johnson tried to make the chain more stylish by ending discounts in favor of everyday low prices and by redesigning stores around select exclusive labels. Customers were confused — and stayed away.
“What Ron Johnson was trying to do was take it out of a suburban sensibility and take it into an urban sensibility. They weren’t loyal to its spirit,” Charney says, “They have to respect the original core JCPenney brand.”
JCP’s board may have been enchanted by Johnson’s big new vision but customers are often conservative people, Charney believes. “To shift gears so abruptly is not good for customers … I think some people were excluded by the new approach.”
Charney added that Johnson may have been proven right if he had been given a longer timeframe at the helm. “I personally thought it could end up better than worse.”
“You think of Steve Jobs as a man who ‘thinks different’ and that’s what Ron Johnson was trying to do. But it was too short a time period,” Charney says.
“The board [of directors] is supposed to be taking the long term view … Ron Johnson is a thinker and he wasn’t given an adequate amount of time.”

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