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The Telltale signs are swirling at J.C. Penney

JC PenneyI’ve been taking sailing lessons this past month and I’ve learned how to use the telltales of my sail to indicate wind direction and whether I am following my sailing ‘roadmap’. Being on the water gives one the time to think without the constant rush of noise, deadlines and distractions that life on land offers.

With the recent and sudden departure of Michael Francis, the marketing and merchandising guru that was brought into J.C. Penney to revitalize this icon of American retail, I was stuck by how the marketplace reads the telltales of a company when unexpected news hits. Especially news about a high profile, high level executive.

It is obvious from the reaction on Wall Street that this news was taken to indicate stormy waters and a bigger headwind in the future for J.C. Penney as it tries to regain a higher level of prominence and profitability. And from the fact that the stock price was down 30% for the year even before Mr. Francis’ abrupt exit, it appears that the savvy investors could read the telltales long before.

However, this situation of a sudden drop in the value perception of a company does not have to happen every time an event like this occurs. When a company prepares internally and externally for unexpected events and has a well thought out contingency plan in place this is how the damage can be short-lived or even non-existent.

Witness the situation with Apple Computer last summer when Steve Jobs passed away. The public’s perception of Apple did not turn sour even though there was skepticism about the ability of his successor, Tim Cook, to step up and take the helm. Despite the rock-star status of Steve Jobs he had groomed Mr. Cook for this day. The company’s business core was strong and getting stronger. Less than a year later the stock price has surged.

It appears that J.C. Penney bet the bank on hiring their own rock-star in hiring Michael Francis. Time will of course tell whether the company has a well planned roadmap for future success and that the current events are just a ‘gust of wind’ taking the company off course for a short time. Keep an eye out for additional telltales as J.C. Penney charts a course for the future.

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