(Corrects bullet point and 18th paragraph to show stock value belief is based on conditions)
* Says Johnson's physical absence hurt
* Thinks stock could be worth $75/share if sales rebound, costs contained
* Says prepared to pour in more capital as needed
* Shares close up nearly 5.5 percent
By Martinne Geller
NEW YORK, April 11 J.C. Penney Co Inc board member William Ackman on Thursday acknowledged the shortcomings of the chief executive officer he handpicked to turn around the retailer and said he was optimistic about the company and its future.
Speaking at a luncheon in New York, Ackman said Penney's former CEO Ron Johnson was not at the company's Texas headquarters enough, since his family lives in California. Even though Johnson worked hard, Ackman said the lack of his physical presence "affected the morale of the home team."
This is the first time Ackman, a J.C. Penney board member since 2011, has spoken publicly since Johnson, the Apple alum he chose to lead the turnaround, was dismissed from his position on Monday.
He described Johnson as being brilliant and visionary, but said the team lacked strong enough operational talent.
"The execution, the basic blocking and tackling of running a retailer -- that's what Ron (Johnson) didn't have," Ackman said. For that, he called out Mike Kramer, the chief operating officer, who has left the company, he said. A media report late on Wednesday said three more executives, including Kramer, left J.C. Penney.
J.C. Penney's stock price tumbled 27.6 percent in the first quarter as Johnson's plans to upgrade the store's merchandise and streamline its pricing structure, which had long relied on coupons, alienated the store's long-time clientele but failed to draw in new customers.
Ackman's hedge fund, Pershing Square Capital Management, owns an 18 percent stake in J.C. Penney. The company's troubles have left his portfolio with some $500 million in losses.
The board has now turned to Myron Ullman, Johnson's predecessor. In the past, Ackman had been openly critical of Ullman, saying as recently as last May that the department store operator had been chronically mismanaged and had failed to create value for shareholders for the last 20 years.
What the company needs now though, is somebody who can "stabilize the place" and "calm the vendors", Ackman said, calling Ullman "the right guy at the right time".
The company will return to offering newspaper circulars shortly, Ackman said.
J.C. Penney was not immediately available for comment. Johnson could not be reached for comment.
OFF THE RECORD
At the luncheon, which was attended by hundreds of people and sponsored by New York University's Schack Institute of Real Estate, Ackman had asked for his comments on J.C. Penney to be off the record. No reporters objected at the time, though his comments were soon reported by other news outlets.
Reuters attended the luncheon, which was part of an annual real estate conference at which Ackman is often a panelist.
At the same time Ackman was speaking, a New York state judge urged J.C. Penney and rival Macy's to settle their lawsuit over who can sell home goods bearing the name of domestic doyenne Martha Stewart.
The two companies have been battling since 2011 when J.C. Penney said it would open "Martha Stewart" stores within J.C. Penney stores. Macy's claims it has exclusive rights to make and sell Martha Stewart products.
Ackman did not address the lawsuit.
While acknowledging Johnson's mistakes, Ackman also reiterated his belief in J.C. Penney's future, saying its shares could be worth $75 if revenue returns to 2011 levels, and if yearly expenses are contained at current levels.
The shares ended up 77 cents, or 5.46 percent, at $14.86 on the New York Stock Exchange.
"I don't see a scenario in which we don't work this thing out," Ackman said, adding that he and other shareholders were prepared to pour in more capital as needed. "The company will continue." (Reporting by Martinne Geller and Ilaina Jonas in New York; Additional reporting by Svea Herbst-Bayliss in Boston; Editing by Gary Hill and Leslie Gevirtz)