J.C. Penney ousts CEO Johnson

NEW YORK (AP) ― J.C. Penney’s board of directors has ousted CEO Ron Johnson after only 16 months on the job as a risky turnaround strategy backfired and led to massive losses and steep sales drops.

The department store chain said late Monday in a statement that it has rehired Johnson’s predecessor, Mike Ullman, 66, who was CEO of the department store chain for seven years until November 2011.

The announcement comes as a growing chorus of critics including a former Penney CEO, Allen Questrom, called for his resignation as they lost faith in an aggressive overhaul plan that included getting rid of most discounts in favor of everyday low prices and bringing in new brands.

The biggest blow came last week from his strongest supporter, activist investor and board member, Bill Ackman, who had pushed the board in the summer of 2011 to hire Johnson to shake up the dowdy image of the retailer. He reportedly told investors on Friday that Penney’s execution “has been something very close to a disaster.”

On Saturday, Ullman received a phone call from Penney’s chairman Thomas Engibous asking him to take back his old job, according to Penney spokeswoman Kate Coultas.

Neither Johnson nor Ullman were available for an interview.

Until early last week, some analysts thought the board would give the former Apple Inc. and Target Corp. executive until later this year to reverse the sales slide. Johnson was in the midst of rolling out shops devoted to brands like Joe Fresh and home furnishings designer Jonathan Adler. The new shops, which started opening last year, had been faring better than the rest of the store.

“I truly believed that he had until holiday 2013,” said Brian Sozzi, CEO and chief equities strategist Belus Capital Advisers. “Today’s announcement is an indictment of his strategy.”

Penney’s stock price showed investors’ frustration with Johnson. When news began to leak after the market closed that Penney was ousting Johnson, the stock, which had closed at $15.87 in the regular session, climbed nearly 13 percent to $17.88 in after-hours trading. But as pleased as investors were about getting rid of Johnson, they didn’t appear impressed with his replacement. After Penney announced Ullman would take over, the stock reversed course falling as far as 11 percent from its regular closing price, to $14.10 and 21 percent from its after-hours high.

Under Ullman, the chain brought in some new brands such as beauty company Sephora and exclusive names like MNG by Mango, a European clothing brand, but he didn’t do much to transform the store’s stodgy image or to attract new customers. He’s expected to serve mostly as a stabilizing force, not someone who will make changes that will completely turn the company around.

“What they need is a little bit of stability and essentially adult supervision,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “(Ullman) did nip and tuck surgery,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “But this was a place that needed radical surgery.”

Sozzi said he thinks that Ullman will only serve as an interim CEO. He expects the Plano, Texas company’s board will hand off the job to another executive who may want to take the company private.

Johnson’s future at Penny became uncertain after the department store retailer reported dismal fourth-quarter results in late February that capped the first full year of a transformation plan gone wrong. Penney amassed nearly a billion dollars in losses and its revenue tumbled almost 25 percent, from the previous year, to $12.98 billion.