J.C. Penney Outs Ron Johnson Brings Back Mike Ullman; Why?

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J.C. Penney Outs Ron Johnson Brings Back Mike Ullman; Why?

J.C. Penney Company, Inc. (NYSE:JCP)  announced yesterday that Ron Johnson would be replaced as CEO. The news caused shares of J.C. Penney Company, Inc. (NYSE:JCP) to spike 13%, however, soon it was announced that former CEO, Mike Ullman would become the new CEO. After the news regarding Ullman, shares slumped over 6% and are now down this morning over 10%. Top shareholder and Board member Bill Ackman was a key proponent of ushering in the Ron Johnson era and ousting Ullman, so why did the company bring back the old CEO? There are a few theories from sell side reports this morning.

Deutsche Bank states that since Bill Ackman brought in Johnson this CEO transition back to Ullman is unlikely to align with his views. DB states “investors should be concerned regarding potential resignation/share sales by Pershing & Vornado.”

Further theories on the topic….

First more from DB

Importantly, the company states that they do not view Ullman’s hire as a sharp change in strategy, given he brought the original shops (Sephora & Mango) into JCP. Instead management cites that they are simply looking for better execution and financial stability. In our view, attaining an external candidate would have required more time for them to conduct due diligence and the familiarity of Mike Ullman was likely needed to calm the fears in the vendor community. With no employment agreement, we believe Ullman will look to quickly assess what is salvageable over the next 6-12 months and make a recommendation to the Board on the next CEO or for an alternative strategic option (via real estate or outright sale).


Ullman brings a deep understanding of J.C. Penney Company, Inc. (NYSE:JCP)’s core customer and what motivates her to shop. He was successful in bringing Sephora and MNG by Mango to JCPenney during his first tenure as CEO. We expect Ullman to continue to try to elevate the assortment to target a more affluent customer. We also expect the resumption of a more promotional cadence versus Johnson’s everyday low price strategy, and more recently weekly promotional cadence. Ullman comes back at a tough time, with the Martha Stewart issues still outstanding a month before the major home launch, a substantial portion of the stores currently under construction, and operating margins that have declined from 4.7% in 2010 to -9.8% in 2012.

Morgan Stanley

Speaking with the company, the two key attributes the BOD was seeking today were stability and immediate execution – something that former CEO Ullman’s intimacy with the company and members of the current mgmt structure provides in their view (noting a lack of marketing head and new CFO in place).


Ullman’s initial approach as CEO is encouraging, in our view. He has prior intimate knowledge of J.C. Penney Company, Inc. (NYSE:JCP)’s business, so he can hit the ground running. Also, Ullman’s approach to improving execution and stabilizing the financial picture by garnering input from JCP’s core constituencies (customers, vendors, employees and shareholders) is refreshing.


Mike Ullman is returning to JCP as CEO less than two years after his departure and the appointment of Ron Johnson. JCP’s severe underperformance (which we think continued in 1Q13) compelled the Board to make a CEO change to stabilize the business. We believe Mike Ullman was a strong choice, as he is one of the top talents available in retail and somebody that is already familiar with JCP’s business. While we view the announcement as a positive, many questions remain unanswered, and we remain Neutral on the stock until we get more clarity and can assess the viability of a course-correcting strategy.

Mike’s primary areas of expertise include technology and sourcing, two areas that JCP was once known for and we expect Mike to rebuild. He was the driver behind many of JCP’s key merchandising partnerships, including Sephora and MNG by Mango, which were the first two shopin-shops at J.C. Penney Company, Inc. (NYSE:JCP) . We also think he will attract top talent from both within and outside of the department store industry, and he will foster talent internally.

Piper Jaffray

After the close yesterday, J.C. Penney Company, Inc. (NYSE:JCP) announced that Ron Johnson will be leaving the company and that former boss Mike Ullman has once again been appointed as CEO, effective immediately. Ullman had led the company as CEO from 2004 and 2011, and we believe his return could help serve as a catalyst to reassure nervous vendors, landlords, and employees, whose relationships with J.C. Penney Company, Inc. (NYSE:JCP) have likely felt increasingly tenuous over the course of the past year.

Credit Suisse

Mike Ullman was certainly not the top-of-mind candidate to replace Ron Johnson, but he does come with certain attributes. He knows his way around all J.C. Penney Company, Inc. (NYSE:JCP) constituents and has a passion for the business. But he must be viewed as an interim appointment, meant to stabilize the situation. His immediate task in our opinion is to gain additional long term liquidity, something he ensured during his previous tenure at J.C. Penney Company, Inc. (NYSE:JCP). We hope that he has secured some assurance from the lead investors to this affect.

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