J.C. Penney’s Board Makes A Move

By Joseph B. White

Ron Johnson’s days as CEO of J.C. Penney Co. look to be numbered. The WSJ reports that a group of Penney directors is prepared to move Mr. Johnson out, or push to sell the troubled retailer unless Mr. Johnson can pull sales out of a nosedive.

Ron Johnson’s days as CEO of J.C. Penney Co. look to be numbered. The WSJ reports that a group of Penney directors is prepared to move Mr. Johnson out, or push to sell the troubled retailer unless Mr. Johnson can pull sales out of a nosedive.
Mr. Johnson, a veteran Apple Inc. executive brought in to overhaul Penney’s lackluster stores and strategy, could still turn things around. The company’s board brought Mr. Johnson in with much fanfare less than two years ago. Dumping him will hurt. But given the company’s dire situation, at least some directors are signaling they’ll take that hit rather than let the company drift into a deeper crisis.
 Penney’s latest quarterly report painted a dismal picture. Comparable store sales down nearly 32% in the latest quarter, while internet sales fell 34% from the year before.
Penney is also leaking cash. The company says it had $1.5 billion in cash and equivalents in hand as of Jan. 28, 2012, and $930 million on hand as of Feb. 2, 2013. That trajectory, if not changed soon, could put an even tighter squeeze on the company. Penney shares are trading at just above $15 a share, less than half their level a year ago.
Just yesterday, Penney director Steven Roth’s Vornado Realty Trust moved to unload 40% of its Penney shares — an apparent vote of no confidence in Mr. Johnson’s direction.
Mr. Johnson came to Penney with a bold plan to wean the retailer off its reliance on heavily promoted discounts. But it appears Penney’s loyal customers liked the old everything’s-on-sale approach, and the people Mr. Johnson wanted to attract with his more upscale approach so far haven’t materialized in adequate numbers.
Penney’s troubles are a warning to middle-brow brands in other industries that it’s fine to aspire to a more affluent, less price conscious clientele, but it can be tricky to make that leap, especially when so many consumers still aren’t feeling flush.