J.C. Penney Names Home Depot's Ellison As Its Next CEO
NEW YORK (AP) - J.C. Penney has named a Home Depot executive as its next CEO.
The department store operator said Monday that Marvin Ellison, currently executive vice president of stores at Home Depot Inc., will become president in November and CEO next August.
J.C .Penney's shares rose in premarket trading on the news.
The 49-year-old Ellison will take over the CEO post from Mike Ullman, who came back to the Plano, Texas company's helm in April 2013 after former CEO Ron Johnson was ousted after only 17 months on the job.
Ullman, who had served as CEO for seven years before Johnson's tenure, worked to stabilize the business after Johnson's botched up transformation plan resulted in disastrous financial results.
Ellison, who will also join J.C. Penney Co.'s board, will take over as CEO on Aug. 1, 2015. Ullman will become executive chairman of the board at that time, serving in the position for a year.
"The board has completed its search for the right CEO to lead the next stage of JC Penney's growth," said Thomas J. Engibous, chairman of J.C. Penney's board of directors in a statement. He called Ellison "a highly accomplished retail executive with a history of delivery top and bottom line results at major American retailers. "
Engibous said that Ellison has an extensive knowledge of stores operations and an ability to successfully run large retail organizations.
Ellison faces big challenges to turn around J.C. Penney. While Penney has clearly coming back from life support, questions remain whether the new CEO will be able to drive sales momentum and get the company back on the path of profitability.
Last week, Penney warned investors at its analysts' meeting that its sales last month were weaker than expected and it cut its outlook for a key sales measure for the current quarter.
The warning overshadowed the company's unveiling of a strategy that the retailer said would boost sales by $2.55 billion over next three years. It would do so by improving the productivity of its stores' home department, expanding e-commerce and sprucing up key areas like jewelry, shoes and handbags.
Penney sees the opportunity for an additional $1 billion in sales from continued market-share growth. That would bring the chain's annual revenue to $14.5 billion by fiscal 2017. That's still well below the $17.3 billion it generated before sales went into a freefall under Johnson.
While company officials blamed the current sales shortfall on too much clearance merchandise a year ago, they also cited a weak sales environment for retailers.
Ullman has been trying to win back shoppers by restoring sales and basic merchandise that the company ditched under Johnson's tenure - discontinuing some of the trendy new brands like William Rast and Joe by Joseph Abboud and bringing back store labels.
Penney also had to increase markdowns earlier in the year to get rid of excess inventory. That has helped result in three straight quarters of increases in sales at stores open at least a year, starting in last year's holiday quarter. But those increases still haven't outweighed last year's drastic declines.
It's been a long climb out of the hole. Penney recorded a nearly $1 billion loss as revenue dropped 25 percent to $12.9 billion for the year ended Feb. 2, 2013, the company's first year of Johnson's failed transformation plan. In the latest fiscal year ended Feb. 1, the company recorded a loss of $1.39 billion while revenue dropped 8.7 percent to $11.86 billion.
During the presentation in New York, Ullman and other executives said that revitalizing areas like shoes, handbags and jewelry is critical because customers that shop in those departments also cross the aisle to the fashion departments. Penney is expanding its women's shoe area by 30 percent and making the men's shoe area separate department.
A lot of the work has been unraveling what Johnson implemented. Penney has overhauled its home area to refocus on more traditional brands after the former CEO's strategy, which emphasized too much trendy merchandise, turned off shoppers. It's also back to focusing on home categories instead of featuring mini shops devoted to a particular label.
The company also has focused on cutting costs. Earlier this year, it cut 2,000 jobs and shuttered 33 stores. Investors expected the company to announce more store closings Wednesday. But Ullman said that its remaining 1,100-store base was productive, including stores in small towns where Penney doesn't have much competition.
Penney said it now expects sales at stores open at least a year to increase by a low single-digit percentage for the third quarter, down from its previous forecast of mid-single-digit growth. The company maintained its third-quarter and full-year earnings projections.
J.C. Penney's shares are up 46 cents, or 6.5 percent, at $7.58 in premarket trading J.C. Penney shares have lost 80 percent of their value since early 2012 when investor enthusiasm was high over Johnson's turnaround strategy.