J.C. Penney (JCP) Looks for a New Leader... Again

The drama at troubled retailer J.C. Penney (JCP) picked up again recently, after reports broke that its recently re-appointed CEO, Mike Ullman, might be headed out the door soon. Ullman, who originally served as CEO from 2004 to 2012, was brought back in April after controversial CEO Ron Johnson's turnaround plans resulted in a disastrous plunge in same-store sales, revenue and earnings. Allen Questrom, who was Ullman's predecessor between 2000 and 2004, is now rumored to be Ullman's successor.

What does this latest management crisis mean for the retailer, and is there any reason to still believe that the company can successfully bounce back? Daily Chart
The reign of Ron Johnson, the former head of retail at Apple (AAPL), was a tumultuous one that confused and alienated customers and investors alike. During his 17 months at the helm, Johnson attempted to create a "store within a store" boutique shopping environment to highlight its more popular brands. He also initiated expensive renovation and rebranding initiatives. But Johnson's worst move was eliminated all special discounts with "everyday low prices" similar to Wal-Mart (WMT) and Target (TGT). That tactic was ill suited for a department store environment, which uses special sales to attract shoppers and boost store traffic. The minimalist rebranding of the stores as "JCP" and new ad campaigns alienated shoppers. During Johnson's tenure, same-store sales declined 25%, while e-commerce sales plunged 50%. Johnson also burned through money quickly in his rapid overhaul of the chain, which caused expenses to outpace revenue on top of negative margins and earnings per share. Aware that J.C. Penney was teetering on the brink of the abyss, the company's board brought back Mike Ullman in April. Ullman had a fairly successful run as CEO until the financial crisis in 2008-2009, from which the company was unable to recover from. Ullman suspended Johnson's costly plan to install 100 in-store branded boutiques by 2015. He also brought back the retailer's "high low" strategy, in which products are initially sold at a higher price when an item is popular, then cleared out through steep discounts after its popularity wanes. Investors were willing to give Ullman a chance, believing that the back-to-school season in August and September could help the retailer generate some much needed revenue growth. Now, J.C. Penney's board is clashing with hedge fund manager Bill Ackman, who owns 18% of outstanding shares. Ackman reportedly wants former CEO Questrom, who was also CEO of Federated (now Macy's), Neiman Marcus and Barneys New York, to replace Ullman. Questrom is often called a "merchant prince" by analysts for his famous turnaround skills. However, Ron Johnson was also known as an expert at retail revivals, turning around Target and Apple before he nearly sent J.C. Penney over the edge of a cliff. Shares of J.C. Penney rallied briefly after reports of Ullman's departure surfaced, but plunged on Friday. The stock is now down 42% over the past twelve months, and is currently deep in the red. Revenue also declined 16.4% year-on-year last quarter. Other News About JCP J.C. Penney: TheDeathSpiralScenario Is it all over for J.C. Penney? Investor Bill Ackman Demands JCP Board Meeting, New Chairman: Letter Bill Ackman wants a new CEO -- again. Other Stocks in the News Should You Keep an Eye on These Eye Treatment Biotechs? Will these three eye treatment stocks soar? Should You Stick With This Teen Apparel Retailer? What happened to American Eagle Outfitters? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 12, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

Posted in ...