* Johnson replaced discounts with low prices, sales plunged
* Shares jump on Johnson's ouster, then ease on Ullman news
* Analyst speculates move could presage a sale
By Phil Wahba
April 8 Attention J.C. Penney shoppers:
Meet the new boss. Same as the old boss.
The struggling department store chain parted ways with Chief
Executive Ron Johnson, who failed to win over shoppers and
investors with his everyday-low-price strategy, and rehired
former CEO Mike Ullman to revive the company.
Shares in J.C. Penney rose nearly 11 percent in afterhours
trade after a CNBC report that Johnson was out, but then fell 7
percent after the company disclosed full details of the move,
including Ullman's return.
William Frohnhoefer, an analyst at BTIG, said that while
"certain investors had beaten the drum saying that a change was
needed and Johnson wasn't the guy," he believed Ullman would not
please the company's critics.
"Investors are concerned about Ullman," Frohnhoefer said,
adding that Penney's sales notched "a decline, on a relative
basis to other retailers, while he was at the helm."
Johnson, former chief of Apple's retail unit, tried to turn
around Penney by revamping the department stores and replacing
its traditional coupons and sales events with everyday low
prices. But sales plunged 25 percent last year, and the company
must now try to woo back shoppers it lost.
Johnson's ouster had been rumored for months, but Ullman's
return came as something of a shock, considering how he had been
publicly condemned by Penney's largest shareholder, hedge fund
manager Bill Ackman.
In a May 2012 presentation, Ackman's Pershing Square called
Penney "chronically mismanaged" and noted the stock's declines
during Ullman's tenure. Its shares fell about 15 percent while
he was CEO from 2005 to 2011. Still, when Ullman left, the share
price was double the current price.
Penney Chairman Thomas Engibous said in a statement that
Ullman was "well-positioned to quickly analyze the situation ...
and take steps to improve the company's performance."
At least one retail expert said Ullman's return might
presage a sale of the retailer.
"Ullman ... he didn't really go out on the wings of glory,
and now they bring the guy back? I honestly think no one else
wanted the job," said Brian McGough, managing director and head
of the retail group at Hedgeye Risk Management.
"The only reason why I would name Ullman as the CEO would
actually be as a temporary fix just because he does know so many
people inside the company, and they have faith in them, and he
could calm waters and he could help to put lipstick on the pig
and get it sold," said McGough.
Johnson was initially seen as such a positive change from
Ullman that shares rose nearly 18 percent the day his hiring was
announced in June 2011. But sales plunged 25 percent during the
first year of his plan to reinvent the department store chain.
Shares of J.C. Penney, which had closed up 2.7 percent in
regular trading, fell 4.7 percent o $15.12 in extended trade.
Last week Ackman - who handpicked Johnson to lead the
company - said the CEO had made "big mistakes" and that the
impact of those mistakes had been "very close to a disaster" for
The company has now brought back its old pricing strategy to
try to bring shoppers back. Executives have acknowledged their
first challenge is to get the chain's old customers back into
Ullman's base salary of $1 million is less than the $1.5
million a year that Johnson received. The company said it has
not signed an employment agreement with him.
Last week, Penney said Johnson did not get a stock award or
bonus after the retailer's weak 2012 results. The company also
said at the time that Johnson would get an exit package of less
than $150,000 if he quit or was fired.
"The positive thing is that (Ullman) knows the company and
the organization - so not someone trying to learn it from
scratch - but he is also the one who left Penney in this
situation, who brought it to the point they felt they needed a
radically new approach," said Kathy Gersch, co-founder of
strategic advisers Kotter International.
"The risk is that they over-correct and throw out everything