April 8 (Bloomberg) -- J.C. Penney Co. ousted Chief Executive Officer Ron Johnson and reinstated his predecessor, Myron E. Ullman III, as the department-store chain works to rebound from its worst sales year in more than two decades. The shares slid in late trading.
The changes are effective immediately, the Plano, Texas-based company said today in a statement. Ullman is the “permanent replacement for now,” the company isn’t looking for another CEO and hasn’t hired an executive search firm, Daphne Avila, a spokeswoman, said in an e-mail. The company said in a filing that Ullman hasn’t yet signed an employment agreement.
The departure comes after a dismal first year on the job for Johnson, who arrived with great fanfare after helping create Apple Inc.’s network of stores. Johnson tried to transform most of J.C. Penney’s locations into collections of boutiques and removing sales and coupons in favor of everyday low prices.
“He tried to change way too many things at the same time, ranging from management to the pricing structure to the shop-in-shop concept,” Howard Gross, managing director of the retail and fashion practice at executive search firm Boyden in New York, said in a telephone interview. “All those things, even if done individually, would have been significant, but to hoist all those changes on the organization in one fell swoop was way too many changes at the same time.”
Sales in the year ended Feb. 2 plunged 25 percent to $13 billion, the lowest since at least 1987. Ullman, 66, served as J.C. Penney’s chairman and CEO for about seven years before Johnson, 54, took over.
J.C. Penney fell 6.2 percent to $14.88 at 7:59 p.m. in New York after earlier climbing as much as 13 percent on a CNBC report of Johnson’s exit. The shares had dropped 50 percent from Nov. 1, 2011, the day Johnson started, through the close of regular trading today.
Johnson’s ouster also represents a blow to hedge fund manager Bill Ackman, who recruited the executive from Apple. Ackman’s New York-based Pershing Square Capital Management LP is J.C. Penney’s largest shareholder, with an 18 percent stake.
Vornado Realty Trust, once J.C. Penney’s second-largest shareholder, said last month that it sold 10 million of its shares in the retailer, representing about 6.1 percent of its outstanding stock.
J.C. Penney’s shop-in-shops, installed in fewer than 700 of the retailer’s 1,100 stores, are part of an effort to turn the company into what Johnson has called a “specialty department store.” Johnson had said his transformation of the company, presented to investors in January 2012, would take four years.
Last year, he said the shops, including boutiques for Levi Strauss & Co. and Izod, were producing higher sales per square foot.
Still, Johnson had come under fire for a remote management style that included hiring at least nine key executives who commuted by plane. Johnson, executive vice presidents Ben Fay and Laurie Miller as well as human resources head Dan Walker and marketing executive Sissie Twiggs all commuted to Texas from California. Other executives flew in from Boston and New York.
The retailer’s marketing department has been losing executives over the past year. The company today confirmed that it had parted ways with Twiggs, a former Apple executive who was serving as a vice president of media in digital marketing. Her departure followed the loss of Michael Francis, a colleague of Johnson’s at Target Corp., in June.
Greg Clark departed as senior vice president of creative marketing in October, and Lisa DeStefano-Orebaugh left her post as vice president of strategic marketing for a job at Home Depot Inc. last month.
“There is a tremendous amount of cleaning up and rebuilding that has to take place,” Gross said.
Bringing back Ullman was a “safe choice,” he said.
“They needed someone at CEO to come and stabilize things,” Gross said. “Ullman has a distinguished track record and will be a soothing influence there.”
Ullman will receive an annual base salary of $1 million, J.C. Penney said today. Johnson’s pay last year dropped to $1.89 million from $53.3 million in 2011, when he was lured away from Apple.
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