CEO Ron Johnson might be the captain of a sinking ship. But he was handed the Titanic when the dining room was already under water.

Reuters

"The Worst Quarter In Retail History."

That's how Henry Blodget described JC Penney's last three months of 2012, as same-store sales took an epic 32 percent nosedive. To be clear about exactly what a disaster that is, it means that for every $100 dollars JC Penney sold in a store around Christmas 2011, it sold only $68 in that store in Christmas 2012. That doesn't look like the beginning of the end for JC Penney. That just looks like the end.

To appreciate how we arrived at this moment, let's rewind the tape about six years. It's early 2007, Steve Jobs is about to introduce the world to "iPhone", and JC Penney's stock is on fire, having tripled since the turn of the century. With 99 percent of purchases being discounts, coupons are looking like an unbeatable business strategy.



Then the recession hits. The stock promptly falls by 75 percent. While competitors like Macy's and Target limp back to recovery, JC Penney clings to its decade low.

Bill Ackman, the activist hedge fund manager who owns a sixth of the company, decides he wants to shake things up. He hires Ron Johnson from Apple. Johnson is a legend, having designed the world's most famous sleek white showrooms and having made Target a discount fashion destination. Johnson is an Ideas Guy, and, naturally, he arrives at JC Penney with an Idea: No more coupon games, just low prices.