Iconic retailer JC Penney Co. (JCP) is struggling to turn around their franchise. Apparently, the board of directors at the company is struggling about who should lead the initiative. On Monday evening, after 17 months in the top exec position, Ron Johnson “resigned” and his predecessor, Myron “Mike” Ullman was announced as retaking command. Johnson replaced Ullman in 2011, after Ullman, whom has 25 years’ experience in retail, had been seated as CEO since 2004.
Ullman will also get a seat on the Board of Directors.
Johnson joined JC Penney from Apple, Inc. (AAPL) where he was head of the tech giant’s retail store chain. Pershing Square Capital Management’s Bill Ackman, whom hold a director seat at JCP (PSCM is the largest shareholder of JCP), pushed for Johnson to be brought on board to help transform the old brand into a more hip, 21st century-type of company and bolster fleeting sales.
Johnson initiated a series of unpopular changes with faithful customers, namely pulling coupons and sales in favor of everyday lower prices. The plan backfired with sales slumping during Johnson’s first full year, including the critical holiday season. Johnson was widely criticized – including seemingly losing the support of Ackman recently – for making the changes without conducting test markets first to see how they would be received.
In 2012, JC Penney lost $985 million, or $4.49 per share, as it underwent its overhaul. Revenue fell to its lowest level since 1987.
Initially, Johnson’s appointment as CEO boosted shares of JCP from around $30 to as high as $42.94, but a plunge followed, with shares dropping 67 percent to as low as $14.10 last week.
JC Penney has not said whether Ullman is back on an interim basis while they search for a different replacement or back permanently. No commentary on the fate of executives that Johnson brought in after Ullman’s camp either left or were dismissed was offered either.
Brian McGough, managing director and head of the retail group at Hedgeye Risk Management, immediately stepped up and offered that the JCP board should tender their own resignations for making the decision for a change at the wrong time.
“We are fortunate to have someone with Mike’s proven experience and leadership abilities to take the reins at the Company at this important time. He is well-positioned to quickly analyze the situation JCPenney faces and take steps to improve the Company’s performance,” commented Thomas Engibous, Chairman of the Board at Plano, Texas-based JCP, in a prepared statement Monday.
Ullman added, “While JCPenney has faced a difficult period, its legacy as a leader in American retailing is an asset that can be built upon and leveraged.” Ullman said that he intends to immediately engage with customers, vendors, tem members, shareholders and JCP leadership to articulate a new plan for future success.
Safe to say, he certainly has his work cut out for him.
In extended trading on Monday, shares of JCP rallied about 13 percent upon hearing that Johnson was stepping down, but erased those gains when Ullman was reported to be resuming his old position, ending after hours trading down by about 5 percent for the day.