Ackman Pressures J.C. Penney to Find New CEO
Bill Ackman is ratcheting up pressure on J.C. Penney Co. to accelerate management changes as the retailer works to rebound from the sales decline and cash drain that’s cut almost a third of market value this year.
The board agreed July 22 to begin a search for a new chief executive officer, to be named within six months, according to a person familiar with the matter, who asked not to be identified as the process is private. Ackman is pushing the retailer to find a CEO to replace Myron Ullman by mid-September since there are only a few candidates, the person said.
Among those possibilities are Foot Locker Inc. (FL) CEO Ken Hicks, Bon-Ton Stores Inc. chief Brendan Hoffman and Hudson’s Bay Co. (HBC)’s Bonnie Brooks, according to the person. J.C. Penney’s plight stems from a series of missteps that began under former CEO Ron Johnson, whom Ackman recruited to the retailer from Apple Inc. Johnson’s plan to jettison sales events and remake the chain’s stores into collections of boutiques failed, causing sales in the retailer’s most recent year to plunge 25 percent to the lowest in more than two decades.
“Everyone knew that Ullman was coming on more as a temporary position until they figured out a transition,” Mary Ross Gilbert, a managing director at Imperial Capital LLC in Los Angeles, said in an interview. “My impression is that major shareholders are panicking after seeing the stock crater and hearing the speculation in the press about vendor concerns and potential bankruptcy, etcetera.”
Shares Gain
The shares, which had fallen 12 percent this month through yesterday, gained 6.8 percent to $13.67 at the close in New York.
Daphne Avila, a spokeswoman for J.C. Penney, didn’t immediately reply to a request for comment. Nor did spokesmen for Foot Locker and Bon-Ton. Andrew Blecher, an outside spokesman for Hudson’s Bay, declined to immediately provide a comment.
Ackman, whose Pershing Square Capital Management LP is the Plano, Texas-based retailer’s largest shareholder, wrote his fellow board members to say that he got former J.C. Penney CEO Allen Questrom to agree to return as chairman if he approves of the department-store chain’s next CEO.
“As J.C. Penney’s largest shareholder, I strongly urge that we immediately put together a short list of candidates, determine their interest level, and schedule a fast-track interview process with the board,” Ackman wrote in the letter.
CNBC reported on the letter earlier.
Ullman, 66, returned as CEO in April after the board ousted Johnson amid a failing attempt to transform the department-store chain into a collection of boutiques. J.C. Penney’s sales in the year ended in February dropped 25 percent to $13 billion, the lowest since at least 1987, according to data compiled by Bloomberg.
Core Customers
Ullman had served as J.C. Penney’s chairman and CEO for about seven years before Johnson was brought over from Apple, where he helped build the company’s retail operations.
Since taking over, Ullman has been trying to woo back middle-aged women, the chain’s core customers, who decamped when Johnson changed the merchandise mix to attract younger shoppers and reduced discounts. Ullman has revived so-called “doorbusters” bargains usually reserved for the holiday-shopping season.
Marketing has been refocused on bargains and private-label lines like St. John’s Bay, a $1 billion brand that had its women’s apparel discontinued under Johnson. The company is also bringing back three other brands popular with older, female shoppers: Ambrielle, a lingerie line, outdoor-apparel Made For Life and JCP Home.
Cash Balance
Ullman also has labored to shore up J.C. Penney’s cash balance. In April, the company hired AlixPartners for a few weeks to help the company get fresh financing, said a person familiar with the situation.
That same month, the company started negotiating a $2.25 billion loan arranged by Goldman Sachs Group Inc. and borrowed $850 million from a revolving credit facility. The Goldman financing removed short-term pressure, said the person, who requested anonymity because the matter is private. AlixPartners has since stopped working with J.C. Penney, the person said.
Investors are trading unsecured notes at prices that reflect growing concern that cash on hand won’t be adequate to fund a turnaround. J.C. Penney, which estimated on Aug. 1 that it has about $1.5 billion of cash, will probably report its eighth consecutive quarterly loss on Aug. 20, according to analysts’ estimates compiled by Bloomberg.
Kimberly Greenberger, a New York-based analyst at Morgan Stanley, had earlier projected that the company would have $1.9 billion in cash by Aug. 1. Greenberger said the disclosure implied cash use of about $1 billion from the previous quarter amid lower operating cash flow, increased capital spending and higher-than-expected inventories.
To contact the reporters on this story: Beth Jinks in New York at
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To contact the editors responsible for this story: Robin Ajello at
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