In his 17 months as CEO, Ron Johnson did to J.C. Penney (JCP) what 111 years of retail history couldn’t — he brought the company to the brink of extinction. Sales plummeted along with J.C. Penney’s stock price as long-time customers stopped showing up and new ones didn’t appear in the amount needed.
By Monday Johnson, a former executive at Target (TGT) and retail chief at Apple (AAPL), was out and Myron (Mike) Ullman, Johnson’s predecessor at J.C. Penney, was back in charge. Can J.C. Penney survive? We put that question to retail legend and turnaround specialist Howard Davidowitz, chairman of Davidowitz & Associates.
He tells The Daily Ticker, “Now it doesn’t look survivable. It’s in the process of disappearing but there may be a way to stabilize it.”
Davidowitz says, “The first thing they have to do is stabilize…slow the pace of change [spending]…raise cash…sell stores, sell real estate…the place is in complete catastrophe."
From the time Johnson joined the company until his departure, J.C. Penney’s stock price plunged 51% to just under $14 a share. The stock rose in after-market trading Monday immediately following the announcement of Johnson’s leaving, then retreated Tuesday. By the time the market closed Tuesday, the stock was down another 12% and it’s off another 2% today — a day when the S&P 500 just hit another record high. Clearly the stock market isn’t convinced that J.C. Penney can be saved.
The company needs a plan, says Davidowitz. In addition to slowing spending, raising cash and selling assets, he suggests J.C. Penney improve relationships with the financial community, suppliers and vendors — “convince them this is a go-forward business,” change promotional strategy fast and bring in new key players.
Davidowitz says he has “no idea” if Ullman is the right man to turn around J.C. Penney but adds that at least he knows the business. J.C. Penney was profitable when Ullman was its CEO but he wasn’t a great success. Davidowitz's advice to Ullman: “You’re not looking for a home run. You’re looking for a bunt single.”
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