US J.C. Penney sacks CEO and reinstalls old boss
TextileFuture has reported that J.C. Penney has lost millions of dollars with the 17 months of CEO Ron Johnson (ex Apple) at the helm. Now the Board of Directors stepped on the brake and ousted and replaced him with his predecessor Myron Ullman (66)
Ron Johnson leaves Penney in a though situation as it is burning through cash and losing customers. The new old CEO Ullman faces quite some odds since retailers fight for every percentage point of sales improvement, and only a few have rebounded from declines as deep as 25 % drop under Ron Johnson in the first year of his reign.
Ullman will also serve on Penney’s Board stated in an interview that it is a tough job Penney has to face to climb back from the drop in sales and profitability. He will have to make decisions on what to keep and what to replace from Johnson’s strategy and his management team. But he made clear that he will not recommend to go back were J.C. Penney was when he left. Things change, he commented further , there is no reason to try and alienate customers who want to try and shop at J.C. Penney.
It was also revealed that a number of other retail CEOs were unwilling to take on the job given the size of the company’s problems and constraints on its cash!
Penney’s largest shareholder, activist hedge.fund manager William Ackman, has been instrumental in heaving Ron Johnson (56) in Penney’s driver seat and it was also him who wanted Ullman to retire and make way for Johnson.
However, Penney paid heavily to lure Johnson from Apple, issuing the new CEO about USD 50 million in stock to make up for equity awards he left behind at the iPhone maker Apple, however the company isn’t obliged to pay him much to leave. Johnson opted not to enter into a termination pay agreement, but he will be entitled only to any unpaid salary and USD 143924 from a saving plan and the value of unused vacation. Penney did however not state if it pays any additional severance pay. Johnson holds warrants that enable him to by nearly 7.3 million shares of Penney’s stock, but he spent almost USD 50 million on the warrants, but their exercise price of USD 29.92 a share is about twice the stock’s current level.
Penney’s revamped stores and new lines of merchandise, such as Joe Fresh won appraisal but shoppers were turned off by Johnson’s decision to cut back clearance sales and did not respond when Penney started to reintroduce markdowns last year. TextileFuture reported these facts in detail. Penney’s sales fell 25 % in the fiscal year ending February 2, 2013, depriving Penney of USD 4.3 billion in revenue.
Johnson’s promoter has been last month among the Board Members putting the CEO on a shorter leash. Another large shareholder dumped more than 40 % of its stake in Penney’s. Since the beginning of the year the shares value dropped 20 %.
The search for senior executives for Penney’s management team continues and includes another former executive, Vanessa Castagna. She is now a retail-industry consultant who serves on the Boards of Levi Strauss & Co. and Carter’s Inc.
Textile-Future will continue to watch the forthcoming of Penney’s and the re-establishment of its brand.