Filed under: JC Penney, Apple, Retail, Consumer Goods, Target
By ANNE D’INNOCENZIO
NEW YORK — J.C. Penney is hoping its former CEO can revive the retailer after a risky turnaround strategy backfired and led to massive losses and steep sales declines.
The company’s board of directors ousted CEO Ron Johnson after only 17 months on the job. The department store chain said late Monday, in a statement, that it has rehired Johnson’s predecessor, Mike Ullman, 66, who was CEO of J.C. Penney Co. (JCP) for seven years until November 2011.
The announcement comes as a growing chorus of critics including a former Penney CEO, Allen Questrom, called for Johnson’s resignation as they lost faith in an aggressive overhaul that included getting rid of most discounts in favor of everyday low prices and bringing in new brands.
The biggest blow came Friday from his strongest supporter, activist investor and board member, Bill Ackman, who had pushed the board in the summer of 2011 to hire Johnson to shake up the dowdy image of the retailer. Ackman, whose company Pershing Square Capital Management, is Penney’s biggest shareholder, reportedly told investors that Penney’s execution “has been something very close to a disaster.”
On Saturday, Ullman received a phone call from Penney’s chairman Thomas Engibous asking him to take back his old job, according to Penney spokeswoman Kate Coultas. The board met Monday and decided to fire Johnson.
Neither Johnson nor Ullman were available for an interview.
Until early last week, some analysts thought the board would give Johnson, a former Apple Inc. (AAPL) and Target Corp. (TGT) executive, until later this year to reverse the sales slide. A key element of Johnson’s strategy was opening new shops featuring hot brands to help turn around the business. They began opening last year and had been faring better than the rest of the store.
“I truly believed that he had until holiday 2013,” said Brian Sozzi, CEO and chief equities strategist Belus Capital Advisers. “Today’s announcement is an indictment of his strategy.”
Under Ullman, the chain brought in some new brands such as beauty company Sephora and exclusive names like MNG by Mango, a European clothing brand, but he didn’t do much to transform the store’s stodgy image or to attract new customers. He’s expected to serve mostly as a stabilizing force, not someone who will make changes that will completely turn the company around.
“What they need is a little bit of stability and essentially adult supervision,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “[Ullma]) did nip-and-tuck surgery. But this was a place that needed radical surgery,” Johnson said.
Sozzi said he …read more
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