J.C. Penney shares shoot up on talk CEO may leave

Tue Mar 12, 2013 3:47pm EDT

A JC Penny department store sign is shown in Oceanside, California, November 5, 2012. REUTERS/Mike Blake

A JC Penny department store sign is shown in Oceanside, California, November 5, 2012.

Credit: Reuters/Mike Blake

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(Reuters) - J.C. Penney Co Inc (JCP.N) shares rose 5 percent on Tuesday amid talk the department store chain's Chief Executive Ron Johnson might step down soon after poor annual results.

A company representative said there was no basis to market rumors that Johnson might resign.

Penney, in the midst of a radical transformation engineered by Johnson, saw sales fall 25 percent last fiscal year after it largely stopped using coupons and sales events. There have been many calls for Johnson's dismissal, including one from former Penney CEO Allen Questrom.

But some said a departure now by Johnson could harm Penney as it gears up to unveil 30 new boutiques this year, including one for the trendy Joe Fresh clothing brand this week, at 700 of its stores.

The shops are part of Johnson's multi-year plan to carve stores into collections of branded boutiques offering trendy but affordable merchandise. Michael Graves and Jonathan Adler are among the designers set to open shops at Penney stores this spring.

"It would be disruptive - nothing would change tomorrow," Morningstar analyst Paul Swinand told Reuters. "Vendors have lined up for the Johnson program."

A source told Reuters last week that the board was prepared to give Johnson another six months, enough time to gauge progess at Joe Fresh and Penney's new home section, to be launched in May, before any possible move to remove it.

(Reporting by Phil Wahba in New York; Editing by David Gregorio)

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