J. C. Penney Names Marvin Ellison New CEO & President
J. C. Penney Company, Inc. (JCP) has zeroed in on a successor for CEO Myron E. (Mike) Ullman, III. Marvin Ellison, currently serving as the executive vice president of stores at The Home Depot, Inc. (HD), will be J. C. Penney’s new president and CEO designee with effect from Nov 1, 2014.
Ellison will also be inducted into the company’s board of directors. Ullman is expected to step down on Aug 1, 2015 but will serve as an Executive Chairman of the board for another year.
Ellison, who has proved his mettle during his over 30-year’s career in retail, is an expert in the logistics and store operations areas and a proven leader. At Home depot, he oversees a strong network of 2,000 stores and leads a workforce of 150,000. Before serving for 12 years at Home Depot, Ellison worked with another big retailer Target Corporation (TGT) for 15 years.
However, many analysts have pointed out that Ellison’s lack of experience in the fashion business could cause a problem. This might as well be the reason behind a prolonged transition period. Ullman has already stated that he would be working with Ellison closely to guarantee a hassle free transition and ensure that J. C. Penney‘s turnaround does not hit a roadblock.
Ullman was brought back from retirement after the then CEO Ron Johnson’s ambitious turnaround plan backfired and losses mounted in billions. After his ouster in Apr 2013, Ullman was reinstated to bring the beleaguered company back on track.
Ullman, to an extent, has succeeded in pulling J .C. Penney out of troubled waters. This Zacks Rank #2 (Buy) stock has beaten the Zacks Consensus Estimate in the trailing four quarters by an average of 12.2%.
In addition, at its Investors Day meeting, held a couple of days back, the company highlighted several growth strategies. Among these initiatives are the company’s plan to rejuvenate its key areas like beauty, jewelry and fashion accessories to generate higher footfall, develop eCommerce with special focus on mobile commerce and additional facilities like same-day shipping and delivery along with enhancing store productivity of its home stores.
The company also plans to open more Sephora stores across several locations and has partnered with The Walt Disney Company (DIS) to bring over 100 Disney shops at its outlets by the 2015 back-to-school season. In addition, the company will bring together a compelling assortment of brands both in house and other big national brands at the J. C. Penney stores, to drive traffic.
As per the company, these initiatives provide an opportunity to generate $1.2 billion in EBITDA by 2017. Further, the company expects to realize incremental sales of $2 billion over the next three years, implying a mid single-digit growth. Also, J. C. Penney has delivered three straight quarters of positive sales by maintaining focus on the key business areas.
However, taking these incremental sales into account, the company’s revenues would be still lower compared with the pre-Johnson era. Adding to the investors’ woes, the company slashed its comparable-store sales guidance for the third quarter of fiscal 2014 on account of lower-than-expected sales in September coupled with a difficult retail backdrop.
Ellison certainly has a huge task in front of him. His retail background will definitely be of help as he tries to leverage the company back to its old profitable self.
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