JCPenney's Senior Management Team Knows There's Only One Way Out Of This Mess

(Photo by Tim Boyle/Getty Images)

JCPenney has sunk deep down into a bog, and there's only one way for the company to climb out.

The retailer needs to get its old customers back — the ones it abandoned when CEO Ron Johnson took over and began to transform the company to appeal to a younger demographic.

They're the customers who want coupons, who want sales, and who yearn for the old Penneys.

And they must return.

JCPenney's senior management team knows that reconnecting with core customers is the company's only hope.

"First and foremost, we have to connect with our customer — with all of them," JCPenney CFO Ken Hannah said at the Bank of America Retail & Consumer conference last week. "We have done a number of things inside the store that have allowed us to attract a new customer and in some cases, that has been at the expense of our core and we cannot allow that to happen."

That core customer has "lost confidence in us," he added. Analysts and pundits agree.

"It is clear to me JCPenney lost its core customer during the transformation," wrote veteran retail analyst Walter Loeb at Forbes. "The core customer has now found a new place to shop, and the reintroduction of comparison pricing is not convincing and is not reaching the customers management is seeking."

"The middle income shoppers who went to JCPenney no longer feel comfortable there," wrote Abram Brown at Forbes. "Nor will they recognize the place soon."

The retailer needs to keep its new customers, while reclaiming the old. It won't be easy.

The customers who enjoyed the former bazaar of discounted clothing did not approve of what Johnson did to their beloved brand. They've spoken out, both to the media and with their wallets.

After JCPenney killed sales, coupon-loving shoppers felt betrayed by the brand and ran for mid-tier competitors like Macy's, Kohl's, and Nordstrom which have sales regularly.

And customers who embraced the old JCPenney style thought they'd been forgotten.

"[Johnson's] working hard to 'de-frump' the store without considering that many if not most of its customers might have shopped there precisely because they like the more conservative frumpy look," Donna Jones, a 46-year-old JCPenney customer, told The Huffington Post. "Am I frumpy? Probably. Does that bother me? No, not at all."

But here's the issue with customers like Jones. JCPenney will never go back to being the Penneys those shoppers loved. The new shops, brands, logo — everything aligned with Johnson's vision are here to stay.

This has created a new problem.

You see the Joe Fresh shops juxtaposed with Liz Claiborne and realize they're geared at totally different segments.

"Let's say you have a Joe Fresh in the front of the store with sizes under 10 and then a Liz shop focused on baby boomers," Brian Sozzi, chief equities analyst at NBG Productions, told us. "The latter may make the former seem uncool to the consumer with more disposable income."

"That is the pickle JC Penney has now created," continued Sozzi. "Who is the core customer?"