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JC Penney ousts CEO Ron Johnson

J.C. Penney's board of directors has ousted CEO Ron Johnson after only 16 months on the job as a risky turnaround strategy backfired and led to massive losses and steep sales drops.

The department store chain said that it has rehired Johnson's predecessor Mike Ullman, 66, who was CEO of the department store chain for seven years until November 2011.

The announcement comes as a growing chorus of critics including a former Penney CEO, Allen Questrom, called for his resignation as they lost faith in an aggressive overhaul plan that included getting rid of most discounts in favor of everyday low prices to bringing in new brands.

The biggest blow came last week 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. He reportedly told investors on Friday that Penney's execution "has been something very close to a disaster."

Still, some analysts were surprised that the board didn't give the former Apple and Target executive until later this year to reverse the sales slide. Johnson was in the midst of rolling out shops devoted to brands like Joe Fresh and home furnishings designer Jonathan Adler. The new shops, which started opening last year, 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."

Sozzi said he thinks that Ullman will only serve as an interim CEO and is there to "slow the pace of change." He expects the Plano, Texas company's board will hand off the job to another executive who may want to take the company private.

Johnson's future at Penny became uncertain after the department store retailer reported dismal fourth-quarter results in late February that capped the first full year of a transformation plan gone wrong. Penney amassed nearly a billion dollars in losses and its revenue tumbled almost 25 percent to $12.98 billion.

Under Johnson, 54, Penney ditched coupons and most of its sales events in favor of everyday low prices. It brought in hipper designer brands such as Betsy Johnson and updated stores by installing specialty shops devoted to brands such as Levi's to replace rows of clothing racks. Johnson's goal was to reinvent Penney's business into a trendy place to shop in a bid to attract younger, wealthier shoppers. But since Johnson, who was the mastermind behind Apple's profitable stores rolled out his plan, once loyal customers have strayed from the 1,100-store chain. It hasn't been able to attract new shoppers to replace them.

Initially, Wall Street supported Johnson's ideas. In a vote of confidence, investors drove Penney's stock up 24 percent to $43 after Johnson announced his vision in late January 2012. But as Johnson's plans unraveled, Penney's stock lost more than 60 percent of its value. Meanwhile, credit rating agencies downgraded the company deeper into junk status. On Monday, the stock closed at $15.87, down 50 percent since Johnson took the helm.

In one of the biggest signs of the board's disapproval of Johnson's performance, Johnson saw his 2012 compensation package plummet nearly 97 percent to about $1.9 million without a sizeable stock award he got last year and no bonuses, according to a filing last week.

Meanwhile, in another blow to Johnson's turnaround strategy, Vornado Realty Trust, one of Penney's biggest shareholders, sold more than 40 percent of its stake in the company last month. The company's chairman CEO Steve Roth sits on Penney's board.

During the fourth quarter that ended Feb. 2, Penney widened its loss to $552 million, or $2.51 per share, up from a loss of $87 million, or 41 cents per share a year ago.

Total revenue dropped 28.4 percent to $3.88 billion. .

by He was a big whoopsiereply 1304/12/2013

(cont'd)

Penney's results for the full year were even more staggering. For the fiscal year, Penney lost $985 million, or $4.49 per share, compared with a loss of $152 million, or 70 cents per share, in the year ended January 28, 2012. The company's revenue fell 25 percent, to $12.98 billion, from the previous year's $17.26 billion.

While acknowledging that Penney made some mistakes during the fourth-quarter conference call with investors, Johnson said Penney would start offering sales in stores every week - about 100 of the 600 or so the chain offered each year prior to his turnaround plan. And it would bring back coupons.

"Experience is making mistakes and learning from them, and I have learned a lot," Johnson said at the time. "We worked really hard and tried many things to help the customer understand that she could shop any time on her terms. But we learned she prefers a sale. At times, she loves a coupon."

During his tenure, Johnson had spoken of being around for the long-haul and referred to his plan as a multiyear strategy. The company's board wasn't willing to wait around after amassing such severe losses so quickly.

Johnson's removal marks a dramatic fall for the executive who come to Penney with much fanfare. Virtually no one questioned Johnson's savvy when it was announced in June 2011 that he was leaving his role as Apple Inc.'s senior vice president of retail to take over the top job at Penney, a chain that had gained a reputation in recent years of having boring stores and merchandise.

To the contrary, there were lofty expectations for the man who had made Apple's stores hip places to shop and before that, pioneered Target Corp.'s successful "cheap chic" strategy by bringing such names as home furnishings designer Michael Graves.

But the honeymoon with Wall Street ended soon after customers didn't respond favorably to the changes. Johnson revised his strategy several times in an attempt to bring back shoppers.

by He was a big whoopsiereply 104/08/2013

Supposedly he saw the writing on the wall months ago and sold his JCP stock and made tens of millions of dollars off of it. He never even bothered to move to where the company's headquarters were.

He destroyed the store and got them engaged in a lawsuit with Macy's over Martha Stewart products and still walked away with millions. Now that he's unemployed, maybe he'll appreciate a good sale or coupon every now and then.

by He was a big whoopsiereply 204/08/2013

As a child, JCP was the local store in my small town where my family bought much of our clothing. I have remained a fan of some of their products, until Mr. Johnson became CEO. When placing orders, they seldom had anything in stock and gave no indication if they ever planned to restock. I wrote a letter to Mr. Johnson and eight weeks later got back a form letter asking me to keep shopping with JCP. No attempt to answer my complaints. Guess he can return to Apple and serve all those Apple more koolaid to drink!

by He was a big whoopsiereply 304/08/2013

Update from OMM:

JC Penney announced a change in leadership. CEO Ron Johnson is no longer with the company and has been replaced on an interim basis by Mike Ullman, the retailer's former chief executive. Hopefully, the current and future leadership will not make the same mistakes that caused huge financial losses and declining sales for JCP- a testimony to the fact that when Christians pray, stand together and switch where they spend their money, it has an impact. We can pray JCP will return to its Christian roots the company was established with by its founder, James Cash Penney. If others businesses and companies are smart, they will have noticed and will take note that Christians think before they spend.

by He was a big whoopsiereply 404/10/2013

Wasn't Ullman using the 'Ellen' ads before Johnson was there?

by He was a big whoopsiereply 504/10/2013

"Younger, wealthier shoppers?" The clothing I've seen in JCPenney's isn't going to attract ANY shoppers, young, wealthy, or otherwise. The shit they have now is cheap junk. I guess they figure that's what "younger, wealthier" shoppers want: cheap junk. Maybe teenagers would go for that shit, but how "wealthy" are most teenagers? Actually, from what I hear teenagers have no interest in shopping at JCPenney's at all.

by He was a big whoopsiereply 604/10/2013

I actually liked what was happening at penny's...it was finally looking like a decent store. It was a target/Boston store feeling.

by He was a big whoopsiereply 704/10/2013

They're hiring Tracey Ullman??!!

by He was a big whoopsiereply 804/10/2013

It was a stupid strategy. To try to change store environment (place), merchandise (product), advertising (promotion) and pricing all at the same time without any continuity plan to retain loyal shoppers (people) basically puts all five marketing p's into simultaneous variable play: place, product, promotion, price, and people.

Sane companies knock off one at a time, two if they're really operationally excellent. But when you're working all five variables, your scenarios are to the fifth exponential power and impossible to manage without some serious data jockeys in place.

Only an arrogant fool who thinks that their good taste can overcome this kind of basic operational complexity would attempt something like this. What a joke. I'm sure the adults at Target and Apple never let him get to close to the dangerous machinery. Idiot.

by He was a big whoopsiereply 904/10/2013

Baby boomers are aging and can no longer wear hip clothes. They need to wear dowdier clothing. They are still a large cohort and writing them off in favor of the youth market was stupid. Young people don't shop in department stores.

by He was a big whoopsiereply 1004/10/2013

Why would anyone shop in a dept. store anymore? Esp. for summer clothes, which are flimsy and throwaway anyway. I can go to huge thrift stores and buy an entire summer wardrobe (shirts, shorts, shoes, etc.) for $100 or less.

by He was a big whoopsiereply 1104/11/2013

Ron Johnson fired many people at the Penney headquarters and said that almost all of them were watching Youtube videos all day!

He really wanted to clean house.

by He was a big whoopsiereply 1204/12/2013

I buy most of my clothes at JC Penney and Sears and will continue to do so.

by He was a big whoopsiereply 1304/12/2013
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