Embattled J.C. Penney CEO Ron Johnson is already dealing with a 97% pay cut. Now, he may be losing the support of Bill Ackman, the hedge fund manager who hand-picked him for the top spot.
Reuters reports that Ackman, who has been Johnson's biggest and most prominent supporter, is starting to show signs of impatience with the beleaguered exec. In an investment conference sponsored by Thomson Reuters, Ackman acknowledged that Johnson had made some serious mistakes in his attempts to turn around the retailer's fortunes.
The turnaround, said Ackman, has been "something very close to a disaster." That's the strongest language we've heard yet from Ackman, but we're guessing many shareholders might take issue with the "something very close" part of that statement. Sales for the retailer dropped 25 percent in Johnson's first year at the helm, and the share price has lost more than half its value in the last year.
Ackman specifically cited the fact that there was "too much change too quickly without adequate testing." That's been a common complaint, especially with regard to the now-abandoned "fair and square pricing" scheme. Johnson infamously refused to do a trial run of the new pricing strategy, with the former Apple Store boss supposedly scoffing that "we didn't test at Apple." Another ill-fated change has been a complete revamp of the retailer's apparel offerings, which prompted many older customers to take their business to competitors like Sears (SHLD) and Kohl's (KSS). (At least one customer has stayed loyal, though -- even as Ackman criticized Johnson's turnaround strategy, Reuters reports that he wore socks purchased at J.C. Penney.)
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.
The 10 Oddball Quotes From JC Penney's Fired CEO
Is J.C. Penney CEO Ron Johnson Losing His Biggest Backer?
"The first and most encouraging thing to me is I am completely convinced that our transformation is on track. We are making extraordinary progress in everything we're doing."
"In haircuts, it's pretty incredible. Today we will cut on our tenth day of this effort to help Americans look better, help the kids look better. We'll do our 500,000th haircut, free haircut. And today customers will book their millionth appointment during the month of August to get a haircut.
"We're reducing the money on television. We'll still run television and we're investing heavily in the traditional traffic driving median, so be in the newspaper and we think that's going to be good."
"We're going to go paperless. ... Imagine a retail store without any paper except the signs, because everything will be done digitally through iPods and iPads and those are our priorities and those are all priorities within the next 12 to 18 months."
"Well, for the first 10 days with our new marketing, our traffic is down 7% to last year, which is a dramatic improvement."
"We're inspired by Selfridges. Selfridges is the leading department store in the world. You ask any retailer what's the number one department store? They will all say Selfridges."
"It's a place to refresh and we're going to have coffee bars and juice bars and place to get food, that's 25-square feet of space, but by putting out a few tables that have no cost, where we used to have cash wraps, no one has to leave the store if they want to refresh, they can grab a cup of coffee while someone shops and continue to stay in the store and continue to shop."
"We've rolled out Wi-Fi, but we really don't have a lot of use for it."
"What happens in a big mall of a 1 million square feet, about 600,000 square feet goes to the anchors and the common area which leaves about 400,000 square feet for the stores and the stores average 3,000 to 4,000 square feet. So, you run the math, you have about 100 to 120 stores in a typical mall we're in. We'll have just as many shops with inside JCPenney and that's what we call it a specialty department store. It's like a mall within a mall.
"Yeah, we're very anxious to communicate our pricing to our customer and we have failed at that, right? They were confused. Now, we have a pricing strategy that they understand. We have done focused groups around the country over the last 30 days with our new pricing strategy and they all say, we get it, whereas before, they were confused."
"At Apple our stores were busy when we only had Macs. Then we added the iPod; they got busier. We added the iPhone; they got busier yet. We added the iPad, and they got busier. The same thing will happen here. Next spring it's Joe Fresh, Martha Stewart, all our new partners. It will be just like Apple: boom, boom, boom."
As analyst Bill Dreher of Newedge USA told Johnson on the call, "I want to applaud you for creating one of the most exciting stories in retail write-down."