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J.C. Penney CEO tries to change the way Americans shop

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POSTED November 18, 2012 8:17 p.m.

NEW YORK (AP) — J.C. Penney CEO Ron Johnson seems unfazed that the department store chain's mounting losses and sales declines have led to growing criticism of his plan to change the way we shop. Perhaps that's because this isn't the first time during Johnson's 30-year career that he's attempted what seemed impossible.

People predicted he'd fail at selling high-end housewares and designer dresses at discounter Target, but shoppers still flock there years later for cheap chic goods. Likewise, almost no one believed that the Apple stores he designed to sell the consumer electronics giant's gadgets would make money. Yet Apple's retail operations have become the most profitable in the industry.

At the time, both decisions seemed radical. Now, they each are viewed as strokes of genius.

But Johnson's latest gamble is shaping up to be his biggest. He's not only aiming to reverse the fortunes of Penney, a 110-year-old chain that has had sales declines in four of the past five years as it's struggled to adapt to changing consumer tastes and shopping habits. He's also attempting to do something no other retailer has before: reinvent the department store from the ground up.

Since leaving Apple to become Penney's CEO in November, Johnson has been overhauling everything from the retailer's pricing to its merchandise to its stores. He got rid of most sales. He's brought in hip brands. And he's replacing rows of clothing racks with small shops that make the stores feel like outdoor mini malls.

But since Penney started the changes, the chain has reported three consecutive quarters of big losses on steep sales declines. Its stock has lost more than half its value. Its credit rating is in junk status. And critics are beginning to doubt that Johnson has what it takes to make the chain cool.

"He's trying to start a retail revolution without an army of consumers behind him," says Burt Flickinger, III, president of a retail consultancy. "Penney will suffer dire financial and competitive circumstances as a result."

But Johnson, 53, a Midwest native who speaks about his vision for J.C. Penney Co. with boyish enthusiasm, is undeterred: "Lots of people think we're crazy. But that's what it takes to get ahead."

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