J.C. Penney Company Inc.'s (NYSE:JCP) latest lawsuit is like a pipe bursting on a ship that has already crashed into an iceberg.
Bodum AG, a Swiss kitchen-goods maker, sued J.C. Penney, saying on Thursday that it failed to fulfill a contract to open 638 boutiques in the struggling retail chain to sell its products and its Ordning & Rega brand exclusively in the United States.
With the disastrous relaunch of the home-goods department, the section's sales decreased from 20 percent to 10 percent of total sales last quarter, and an analyst said it was time to cut losses as the company fights to survive.
"I don't think this even matters that much," Paul Swinand, an analyst at Morningstar, told International Business Times on Thursday. "Right now, they can't see the light at the end of the tunnel."
He said the company's failed foray into luxury, chic home-goods products blew up in now-ousted CEO Ron Johnson's face.
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Now, with the reins returned to CEO Mike Ullman, the company is trying to scale back and return to its roots: inexpensive merchandise that appeals to the Plano, Texas, company's more traditional customer base.
"The whole thing is, to get good brands, you have to support those brands and support the customer experience," Swinand said. "You have to agree to a certain level of business. When you're trying to attract a premium brand, you have to jump through a bunch of hoops if you're the retailer."
Penney's ambitious offer to open 638 boutiques to sell the Swiss brand and its Swedish design subsidiary in its stores backfired, and now J.C. Penney is heading back to its roots.
"The plan is to go back to prosaic, cheap-o stuff that customers want," Swinand said.
While it's hard to imagine J.C. Penney reaching the financial stability to start experimenting with its offerings again, Swinand said the business with Bodum likely burned a bridge.
"To think about trying to upscale in five years from now? They're trying to just get to the end of the year and not blow up," Swinand said. "Whether Bodum would shut them down five years from now if they tried to bring them back? No, they won't do business there again."