J.C. Penney Names Apple’s Ron Johnson as Chief Executive; Shares Advance
Stock Chart for JC Penney Co Inc (JCP)
June 14 (Bloomberg) -- J.C. Penney Co. rose the most since 2000 after saying Ron Johnson, who spearheaded the creation of Apple Inc. (AAPL)’s retail empire, will take over as chief executive officer this year at the department store chain.
Johnson, 52, will replace Myron Ullman Nov. 1, the Plano, Texas-based company said in a statement today. He had spent more than a decade at Apple, working with co-founder and CEO Steve Jobs to build the stores where customers now line up overnight for products such as the iPhone and the iPad.
Johnson will oversee a company that is looking to lower expenses to make up for increasing costs for materials, like cotton. The retailer, which operates more than 1,100 stores, this year closed its catalog business and shuttered some locations, following talks with shareholder William Ackman on how to improve results.
“It’s a credit to the company that they were able to recruit an executive of Ron’s capabilities,” Ackman, the retailer’s largest shareholder, said in a telephone interview. His Pershing Square Capital Management LP disclosed a 16.5 percent stake last year in J.C. Penney, making him the largest investor.
J.C. Penney rose $5.26, or 17 percent, to $35.37 at 4 p.m. in New York Stock Exchange composite trading, the biggest percentage gain since Oct. 13, 2000. Apple climbed $5.84 to $332.44 on the Nasdaq Stock Market.
Johnson, a former Target Corp. (TGT) executive, was hired by Jobs to help build the company’s retail operation in 2000. From the first stores opened in 2001 in California and Virginia, Johnson expanded the business to more than 300 locations, generating revenue of $3.19 billion in the quarter ended in March, up about 90 percent from a year earlier.
“While it’s very difficult to leave Apple, perhaps the greatest company in the world, I just wanted a chance to lead a company in an industry that’s kind of tied to my roots in retailing,” Johnson said today in an interview.
Johnson will receive a base salary of $1.5 million and get an annual target bonus equal to 125 percent of his pay, according to a regulatory filing today. He will receive a grant of 1.66 million restricted shares valued at $50 million based on J.C. Penney’s closing stock price on June 13. The restricted stock is intended to compensate him for equity awards from Apple that were going to vest on March 24.
In addition, Johnson purchased warrants to buy 7.3 million shares valued at $50 million with an exercise price of $29.92 a share.
“We’ve got a great retail team in place and are actively recruiting for his replacement,” said Amy Bessette, a spokeswoman for Apple. Johnson is the second senior executive to leave Cupertino, California-based Apple in the past few months. In March, Bertrand Serlet, the senior vice president for Mac software, left the company to focus on scientific research.
J.C. Penney has sales per square foot of $153 last year, while Apple generated $4,355, according to Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co. in New York.
Ullman, 64, will become executive chairman of the department-store chain, the third-biggest in the U.S. He joined the company in 2004 after executive positions at companies including Macy’s Inc.’s predecessor.
Ullman boosted sales at J.C. Penney 1.2 percent to $17.76 billion in 2010, reversing three straight years of declines. Brands by Liz Claiborne, Aldo and Mango helped lift sales at stores open at least a year by 3.8 percent last quarter. Net income in the period ended April 30 increased 6.7 percent to $64 million.
J.C. Penney and other retailers have been hurt by surging costs for cotton, oil and labor in Asia, with several passing costs on to consumers. Johnson also will have to appeal to shoppers as they scrimp on trips to stores because they can’t keep up with the price of fuel.
“They are very lucky -- it’s a big win for them,” Brian Marshall, an analyst with Gleacher & Co. in San Francisco, said of Johnson’s move. “He wanted another challenge to fix something and he saw it at J.C. Penney.”
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