J.C. Penney Co. workers are feeling more pain as the department store chain struggles with a transformation.
More than five months into big changes under its new CEO, Penney announced Tuesday that it's laying off another round of workers at its headquarters in Plano, Texas. The 350 workers being cut were primarily in finance, technology, product development and sourcing, according to company spokeswoman Kate Coultas.
The latest layoffs mean Penney has slashed its headquarters workforce nearly 30 percent, to 3,100 employees, since spring.
Penney is cutting costs amid the difficult task of turning around its business to make it more nimble. But investors are losing faith in Penney's strategy, and shares dropped nearly 6 percent Tuesday. The stock has lost half its value since February after initially climbing on optimism about the changes.
The department store is overhauling every aspect of its operations, from a new pricing plan to new brands to how it produces its goods. But the new pricing plan, which cuts hundreds of sales events in favor of everyday pricing, has turned off shoppers used to big discounts.
Penney reported a bigger-than-expected loss and a 20 percent drop in revenue in the first quarter when the pricing plan was implemented. Some analysts believe that sales are only further deteriorating in the second quarter.
"One of the most challenging tasks for any leadership is to reorganize a company," said Ron Johnson, Penney's new CEO and a former Apple Inc. executive, in a statement. He noted that Tuesday's actions mark "the final phase" of the "right-sizing" of the headquarters.
Tuesday's cuts are part of a plan outlined by Penney in late January to target $900 million in expense cuts to be completed over the first two years of its transformation. That included $200 million in savings from its corporate headquarters as well as $400 million in cost savings in store operations and $300 million in advertising costs.
The company in April announced 600 layoffs at its headquarters. Penney also eliminated 300 jobs at a Pittsburgh customer call center it closed July 1.
But the biggest problem Penney is grappling with is trying to make the new pricing plan work. During an address to investors last month, Johnson continued to back his new pricing strategy. He said that the problem was the chain improperly communicated the change to shoppers. It's now clarifying the savings for shoppers under the three-tier plan, which calls for reducing prices by 40 percent from a year ago, offering deeper month-long discounts and clearance events.
The company has been doing plenty of backpedaling and is now adding clearance events to the calendar in addition to the first and third Fridays of the month. Starting last week, it is now using the word "best clearance" instead of "best prices." Credit Suisse retail analyst Michael Exstein said more needs to be done to create a sense of urgency for the shopper.
"A combination of poor messaging, tampering with the merchandise flow and a slowing of the overall economic environment seem to have contributed to the current state of business," wrote Exstein in a report published Tuesday.
"This sales erosion makes a turnaround even more daunting as the second half approaches," Exstein wrote.
In response, Penney has either slowed or canceled whatever orders it has been able to because of slower sales, he said. That has made its suppliers concerned about whether Penney's plan will work and could impede the company's strategy to lure in new brands, he said. The company has already announced a slew of new names including Betsey Johnson and Vivienne Tam who are coming out with exclusive affordable versions for Penney for the fall.
Shares of J.C. Penney Co. shares fell $1.27, or 5.8 percent, to close at $20.76, making it the No. 5 decliner on the S&P 500 index. The stock earlier traded as low as $20.59, a level last seen in September 2010.