J.C. Penney readjusting pricing, ads

J.C. Penney Co. Inc. is changing its pricing -- again.

Just six months after the midpriced department store chain got rid of the hundreds of sales it offered each year in favor of everyday lower pricing, it is reversing course.

Penney on Feb. 1 began using a three-tier pricing approach that called for consistently lower daily prices, monthlong sales and periodic discounts on merchandise throughout the year. But starting Aug. 1, Penney will eliminate one of the monthly sales and bring back the word "clearance." Penney also plans to tweak its advertising to better communicate the pricing plan to customers.

The moves come at a time when shoppers -- and investors -- have voiced confusion over Penney's pricing strategy, which was spearheaded by chief executive Ron Johnson when he took the helm in November.

In May, Penney's stock plunged nearly 20 percent in its biggest decline in four decades after the retailer posted a larger-than-expected quarterly loss and a 20 percent drop in revenue on poor reception from shoppers for its pricing strategy.

The change also calls into question how patient Main Street and Wall Street will be with Johnson, a longtime retail executive who has been lauded for being the mastermind behind the success of Apple's retail stores and Target's cheap-chic strategy.

The pricing plan is presenting a challenge for Johnson because it's turning out to be a tough sale to shoppers who have come to expect deep discounts and investors who are looking for Penney to turn its business around quickly.

Brian Sozzi, chief equities analyst for research firm NBG Productions, said since Johnson's strategy is long-term, investors likely will give him at least until 2013 to prove himself.

"With a visionary type of strategy like this you have to take a lot of painful medicine up front," he said, adding that Johnson "is essentially trying to change the consumer mindset."

Johnson, who asked investors to be patient during a meeting with them in May, said he's confident the pricing strategy will work. He has acknowledged Penney has a long way to go to convince shoppers they don't have to wait for sales to get low prices at Penney, and he said this week Penney's first-quarter sales drop is "the price we're paying to get integrity back."

Under the new system, Penney is keeping "Every Day" low prices that are consistently 40 percent lower than regular prices before the company eliminated sales.