J.C. Penney Names Home Depot Exec as New CEO
J.C. Penney named Marvin Ellison, credited with resurrecting Home Depot Inc's U.S. business, as its next chief executive as the department store operator looks to push on since stemming a two-year long sales decline.
J.C. Penney (JCP) shares rose as much as 5.3 percent to $7.50 in early trading as the company ended a year-long search for a replacement for interim CEO Myron Ullman.
Ellison, who will take over as CEO on Aug. 1, held a variety of roles at Target (TGT) over 15 years before joining Home Depot (HD) in 2002. The 49-year old has been heading the home improvement chain's U.S. stores business since August 2008.
"Ellison has a successful track record of simplifying store operations, improving customer service, and ... is widely known for being a great leader and motivator," BMO Capital Markets analyst Wayne Hood wrote in a note.
After two years of falling profits, Home Depot has posted an increase of at least 16 percent in earnings every year since 2010 -- a feat that Belus Capital Advisors analyst Brian Sozzi said is down to Ellison and Home Depot's CEO Frank Blake.
Ullman, who was J.C. Penney's CEO from 2004 to 2011, was brought back by J.C. Penney in April last year and succeeded in arresting a same-store sales declines that lasted nine quarters.
Same-store sales has since increased for three straight quarters, but the company has reported a profit only once in the last 12 quarters.
"While Mike Ullman has done a respectable job stabilizing JCP, it's become readily apparent that a new vision is necessary to transform the company and fix its largest problem -- deteriorating traffic," Sterne Agee analysts wrote in a note.
The 112-year-old retailer's market share losses and slide in sales has been blamed on attempts by former CEO Ron Johnson, who was replaced by Ullman, to take the retailer upmarket.
The company has been trying to win back shoppers by revamping its household goods section and bringing back many of the no-frills clothes ditched under Johnson.
Still, J.C. Penney cut its third-quarter same-store sales forecast last week citing lower sales in September and a "difficult retail environment" and laid out plans to revamp the high traffic areas of its stores.
The company said on Monday Ellison would join on Nov. 1 as president and CEO-designee. Ullman will remain with the company as executive chairman for one year after Ellison takes over as CEO.
J.C. Penney said in August that Ullman was recovering from a surgery related to a medical condition he had for more than 20 years.
The stock was up 4.5 percent at $7.44 in morning trading. Up to Friday's close, it had lost 22 percent of their value this year.