J.C. Penney (JCP) today named Marvin Ellison as its newest CEO, replacing Mike Ullman, who has spent the past few months trying to undo the damage done by his predecessor Ron Johnson that cost the 112-year-old retailer billions.
Ellison is currently an executive at Home Depot (HD), where he has worked for 12 years. Prior to his stint at the nation's largest home improvement retailer, he worked for Target (TGT). The 49-year-old will join the Plano, Texas-based company as president and CEO-designee effective Nov. 1 and will assume the leadership of the company on August 1, 2015. At that time, Ullman, 67, will become executive chairman.
Wall Street seems optimistic that Ellison will be able to duplicate his Home Depot success at J.C. Penney, as shares of the retailer climbed 4 percent to $7.41 in early afternoon trading. Home Depot has been on a roll as of late thanks to the improving housing market. During its most recent quarter, Home Depot posted better-than-expected quarterly results fueled by strong sales of appliances and other big-ticket items.
"Mr. Ellison has a successful track record of simplifying store operations (reports, tasks, e-mail directives), improving customer service (established 'power hours' where associates only serve customers), and associate engagement scores and is widely known for being a great leader and motivator," writes Wayne Hood, an analyst with BMO Capital Markets who rates J.C. Penney as "underperform" in a note to clients today. "What is encouraging to us is that Mr. Ellison worked closely with Frank Blake, CEO of Home Depot, and together with other talented executives, rapidly transformed Home Depot's stores and supply chain to compete in today's digital world, turning Home Depot into a leader from a follower. In our view, J.C. Penney's challenges are much steeper against a broader competitive set when compared with home improvement retailing. "
Ullman was brought back to J.C. Penney last year to replace Johnson, who was fired after the company spiraled downward under his leadership after shoppers rebelled after he initiated a confusing "no-sale" policy and stopped selling popular store brands. Wall Street was furious too, since the retailer's stock price plummeted 51 percent as J.C. Penney hemorrhaged money.
Another headache that Ullman inherited from Johnson was its legal spat with Macy's over its relationship with Martha Stewart Living Omnimedia (MSO). Earlier this year, a New York state judge ruled that J.C. Penney interfered with Macy's relationship with Martha Stewart Living when Johnson made a secret deal with the lifestyle entrepreneur's company. J.C. Penney has appealed the decision.
Under Ullman's leadership, J.C. Penney's fiscal fortunes have improved. Earlier this year, he raised $3.89 billion to bolster the retailer's finances through a combination of borrowing money and selling shares. The retailer posted its first gain in same-store sales in more than two years in November 2013. Ullman, who was also CEO from 2004 to 2011, has a unveiled a plan to boost sales by $2.55 billion over the next three years by revamping store areas devoted to shoes and handbags among other things. J.C. Penney is also bolstering its e-commerce operation.
J.C. Penney disappointed Wall Street last week when it slashed its forecast for same-store sales, a key retail metric measuring performance at stores opened at least a year, for the third quarter.
The company insists that it's trying to strike a balance between offering customers compelling deals to bring shoppers to its stores while maintaining its profit margins. For a retailer like J.C. Penney that hasn't had an annual profit in three years, that is especially important.