J. C. Penney on Monday named a Home Depot executive, Marvin Ellison, as president and as its next chief executive, tapping a seasoned retail hand as it struggles to assure investors that a nascent turnaround after two years of heavy losses will be lasting.
Mr. Ellison, currently executive vice president for stores at Home Depot, will join Penney on Nov. 1 and will also be a board member, the company said. He will succeed Myron E. Ullman III as chief executive on Aug. 1, 2015, when Mr. Ullman will become executive chairman for one year — a carefully coordinated handover that appeared to stress stability and continuity after a rocky succession at the retailer last year.
Penney’s losses have slowed under Mr. Ullman. But Mr. Ellison, 49, is now charged with expanding the retailer’s business — a tough task in a market under siege by “fast fashion” juggernauts like H&M and Forever 21 and online retailers, as well as reinvigorated rivals like Macy’s and T.J. Maxx.
Mr. Ellison’s background suggests he will start with the fundamentals. An operations expert who oversaw Home Depot’s 2,200 stores in the United States, Mr. Ellison led a largely successful bid to cut costs and raise store productivity at Home Depot, analysts noted. Before his 12-year tenure there, Mr. Ellison served for 15 years in various positions at Target.
“Over the course of his career, he has proven his ability to produce results by improving operations, building customer loyalty, and motivating his teams,” Mr. Ullman said of Mr. Ellison in a news release. For his part, Mr. Ellison said that Penney was “moving in the right direction” and that as chief executive he would focus “on positioning the company to compete in a rapidly changing retail environment.”
Penney has been trying to chart a growth path by undoing many of the changes introduced by its former chief, Ron Johnson, who was hired from Apple to try to inject pizazz into the 112-year-old Penney. When his turnaround bid — built on a strategy that stressed designer boutiques and fewer discounts — backfired, and saddled Penney with heavy losses, the company abruptly fired Mr. Johnson and brought back Mr. Ullman, who had led the chain from 2004 to 2011.
At an analyst briefing last week, Mr. Ullman emphasized that since his return to Penney in April 2013, the retailer’s business had stabilized. He also laid out strategies that he said would add $2 billion to the retailer’s sales over the next three years, including refocusing on private brands like its St. John’s Bay line of women’s wear.
Analysts have been skeptical of those assurances. In a note to clients on Monday morning, the investment bank UBS called Penney’s targets “overly optimistic.” It said the retailer would find it tough to overcome years of lost traction against strong competitors like Macy’s and Kohl’s.
UBS called Mr. Ellison “a credible hire,” but also noted the incoming executive’s lack of experience in fashion retailing. “An effective store operator helps,” but Penney needs fresh product ideas to reverse dwindling traffic at its approximately 1,100 locations, UBS analysts said in a follow-up note.
Robert Drbul, a retail sector analyst at Nomura, said that by setting a lengthy, nine-month transition period, Penney was trying to send the message that it had put its executive upheaval behind it.
“Investors have been looking for the next chapter of leadership, and some people might just say, ‘Let’s just start the new chapter today,’ ” Mr. Drbul said. “But these guys went ‘Great Balls of Fire’ during the Ron Johnson era, and clearly that wasn’t the right way to go. If you think about all J.C.P. investors have been through, some sort of calmness and continuity is probably a good thing.”
Analysts at Piper Jaffray called the handover period “an appropriate amount of time” for Mr. Ellison to fully acclimate as Penney’s chief executive. Mr. Ellison’s record of improving productivity at Home Depot, while cutting down on expenses, boded well for Penney, they said.
Penney has been bolstering its leadership. Last week, the retailer announced that B. Craig Owens, the retired former chief financial officer of Campbell Soup, was joining its board. Mr. Owens previously headed the food company’s finance, supply chain and information technology operations.
Shares in J. C. Penney jumped about 2 percent in early trading on news of Mr. Ellison’s appointment, but lost those gains to end the day 0.4 percent lower in a wider market retreat.
article by Hiroko Tabuchi via nytimes.com