JCPenney Taps Home Depot Exec to Fix Its Brand

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Consider it a significant victory that JCPenney will have another CEO. Not long ago, its demise seemed to be a distinct possibility.

And at least incoming CEO Marvin Ellison will inherit a job that may have some upside when he becomes chief of the still-troubled retailer in August. But already there are differing opinions about whether he’s the type of leader that Penney needs at this stage in its existence—just a couple of years after former CEO Ron Johnson nearly ruined it, and only very recently having stabilized under the leadership of CEO Myron Ullman.

Ellison, 49 years old, has been executive vice president of Home Depot’s 2,000 US stores since August 2008. Before that he was president of the company’s Northern Division and senior vice president of global logistics. He also was with Target for 15 years before that.

“He has proven his ability to produce results by improving operations, building customer loyalty, and motivating his teams,” current JCPenney CEO Ullman, who preceded Johnson and then came back to the helm in 2013 to try to clean up the mess he left, said in a statement. “His experience and leadership are exactly what we need to accelerate the progress we have made over the last 18 months.”[more]

Ellison, whose Twitter feed is a testament to his commitment to employees at The Home Depot’s stores, will join JCPenney as president and CEO-designee next month. He stated that he was “excited” about the appointment and that he wil focus on “positioning the company to compete in a rapidly-changing retail environment for the benefit of our customers, shareholders, suppliers and associates.”

Ullman helped JCP survive the disastrous loss of sales, market share, employees and brand value under Johnson and has slowly brought back Penney store traffic, customers and sales by using traditional price promotions along with upgrading of merchandise and development of e-commerce.

But following the news of his successor on Monday, UBS cut its recommendation on JCPenney stock to “sell” from “neutral,” saying that the company was “overly optimistic” about 2017 earnings targets and expressing skepticism about its ability to achieve “several years of share gains from strong competitors like Macy’s/Kohl’s.”

The outside world immediately split on whether Ellison, whose hobbies including performing gospel music, is the right person for the job.

Investors at least kept the stock about even on Monday on the news, but JCPenney remained trading near the abysmal $7-a-share level, compared with its 2012 five-year peak of about $42 a share when stockholders hoped that Johnson would be a savior for the embattled retailer by bringing experience and ideas from his tenure as chief of Apple’s retail stores.

Some analysts pointed to Ellison’s track record at The Home Depot including experience in improving e-commerce and customer service. “Ellison’s operational background is needed,” wrote Belus Capital Advisors analyst Brian Sozzi. “Let the veteran merchants around him do the apparel and sneaker buys.”

But that’s the wrong approach, argued Forbes.com contributor Laura Heller, writing that JCPenney needs a new chief with “vision” to appeal to Millennial shoppers and to cope with the continued erosion in traditional retailing. “Perhaps the company is [still] scarred by its experience with [Johnson]. But it still needs someone with vision, creative ideas and merchandising prowess to move JCPenney forward.”

Or, as Heller quoted University of Michigan business professor Erik Gordon, Ellison “is a strong operations manager, but he has spent a dozen years at a chain where fashion means orange aprons. A lot has changed since his days at Target, and he will be challenged to crank up sales at Penney’s, where sweater sets, not screwdriver sets, drive sales.”

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