Ron Johnson's semi-suicidal charge ended badly for him. Unlike most of the troops of Alfred, Lordy Tennyson's poem, however Johnson will get to leave the JCPenny (JCP) field of combat alive with only the remnants of his 2012 compensation package, about $1.9 million or a cut of nearly 97 percent, and no sizeable stock award and no bonuses. As if this wasn't in the cards a few weeks ago? Hopefully, he is getting a better return on his 2011 signing bonus of $53.3 million than did his Board of Directors.

If the owning the news cycle is the goal of public relations, JC Penny (JCP) needs a new shop. As Business Insider reports, "The retailer  has been on a terrible run. The last few weeks have been disastrous: it reported horrific Q4 earnings, went to court to fight Macy's over Martha Stewart, and had a board member dump a chunk of his stake." Caribou coffee opted not to open cafes in the stores.

Tally the butcher's bill: unnecessary litigation, abandonment by equity investor insiders, abandonment by partners, and no shortage of negative media chatter. It's a classical reputational value crisis.  Here's a link to how the Society's Mission Intangible Monthly Briefing moderator, Jonathan Salem Baskin, described the situation qualitatively to CNBC today: Baskin on CNBC.

Here's how the Steel City Re Reputational Value Metrics describe the situation quantitatively. Relative to 24 companies in the Retail Trade/Department Store sector, JCP has had the most volatile reputational value this year (Historic RVM Vol) indicating no consensus of expectations at one point in time. JCP now has the least volatile reputational value (Current RVM Vol) indicating that stakeholders are now in the tightest concensus about prospects. Unfortuanately, those prospects are awful with a CRR rank in the 9th percentile and the worst performing equity with an ROE of -60%. Worst, there is still room to fall and the metrics all indicate a further downward trend and low expectations for stability.

In his interview, Baskin suggested JCP should focus on its reputation. Expectations were very high when Ron Johnson, formerly of Apple, came aboard as CEO. They were at levels that could not possibly be met, and that is why the market is now punishing JCP (and for that matter, Apple). As Baskin said, "It breaks my heart."

Last Friday, J.C. Penny Co. Inc (JCP) reported a $123 million loss for the most recent quarter. CEO Ron Johnson describes the company as “the fastest-growing startup in retail history,” language that unfortunately brings to mind Kodak’s characterization of its innovation-led transformation over the past decade. It is a great mindset but spending, too, has to conform to an environment where the business model is still being perfected.

The company sees itself in transition: the boutique, jcp, emerging from the tired jcpenney. The new jcp is boasting higher productivity of $269 per square foot compared to $180 per square foot at jcpenny. Combined, however, the stores reported a 26.1% drop in same-store sales on reduced traffic of 12%. Internet sales fell by almost 40 per cent in the third quarter reported last week. At best, customers are not sure what to expect. At worst, they've stopped looking. Employees, and other stakeholders are confused, perhaps too, and that, by definition, is impacting the firm’s reputation.

Looking at Steel City Re’s Reputational Value Metrics, its been a wild ride for JCP's RVM. The metrics at left show that both the RVM and CRR measures are holding at nearly rock bottom, but that future stability is unlikely with a ranking among its 22 peers at 0.0 percentile. The volatility metrics, shown at right, report extreme movements with negative directionality. The only conclusion to draw is that stakeholders as a group are confused -- and that can't sit well with equity markets.

A big box retailer’s reputation is driven by the price and quality of its products, but not by its propinquity. Such are the data from an analysis prompted by the July 2010 issue of Consumer Reports magazine whose headline reads, “Best stores for practically anything.”

The 2 June press release provides highlights of a survey of 30,000 readers of the consumer-oriented magazine on their big-store shopping preferences. The companies are Costco (NASDAQ:COST), Dillard's Inc. (NYSE:DDS), Kohl's Corporation (NYSE:KSS), JCPenny (NYSE:JCP), Target Corporation (NYSE:TGT), Sam's Club (NYSE:WMT), Sears (NASDAQ:SHLD), Macy's Inc. (NYSE:M), Meijer (private), Walmart Stores (NYSE:WMT), and Kmart (NYSE:SHLD). The results of the survey may surprise you. If you are a follower of this blog, the correlation of the results of the survey with the metrics of the Steel City Re Corporate Reputation Index should not.

According to the magazine, the Consumer Reports ratings are based on the experiences of 30,666 readers who characterized 56,922 trips to 11 retailers between April 2008 to April 2009. The Reader Score represents overall satisfaction. A score of 100 would mean all respondents were completely satisfied; 80 means they were very satisfied on average; 60, fairly well. The results are summarized in the table at left.

In the two charts below, we show the correlation of the consumer survey data with the Corporate Reputation Index metrics. Blog readers are generally familiar with the underpinnings of the rankings. For this analysis, we created a derivative metric, the Reputation Vector. The reputation vector takes three factors into account: the average Corporate Reputation Index ranking over the trailing twelve months; the trend, and the variance. The first graph shows the correlation of the Reader Score for all of the companies with the corresponding Reputation Vector value. The slope is positive, but the explanatory power of the trend line only accounts for about 20% of the variance.

According to the survey, for each of the stores, readers cited their primary reasons for shopping at that venue. The three reasons were low price, high quality products, and location. When the data are analyzed separately, a slightly more interesting pattern emerges. All three trend lines are still positive, but the explanatory powers are radically different. 77% of the variance in Reader Score is explained by variance in the Reputation Vector when shoppers were motivated by price; 100% of the variance is explained by the Reputation Vector when shoppers were motivated by quality (not that meaningful with only two data points); but only 4% of the variance is explained when shoppers were motivated by location.

The data suggest that the overall consumer experience as indicated by the Reader Score correlates well with the financially-relevant derivative metric of Reputation Vector – which captures the behavioral expectations of stakeholders -- when price or quality are the primary drivers of behavior. The moral: “Location, location, location” may still be important, but with so much now accessible through the internet, price and quality are by far more important drivers of reputation and the economic benefits and costs thereon.