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The Clock Is Ticking for New J.C. Penney CEO

Rich Duprey, The Motley Fool

Four months after J.C. Penney (NYSE: JCP) lost its CEO to Lowe's when Marvin Ellison jumped ship, the troubled department store chain found a replacement. Taking over the helm is Jill Soltau, the former president and CEO of craft-store chain JoAnn Fabrics, who has several decades of experience in the retail industry, including stints at Sears and Kohl's (NYSE: KSS).

Still, becoming the captain of a vessel that looks poised to go under is not an enviable position, and J.C. Penney threw a lot of cash at her to lure her in. Soltau is getting a $6 million signing bonus, a $1.4 million base salary, and the chance to earn a bonus of as much as 300% of her base salary, or some $4.2 million, with $1.575 million of it guaranteed for the retailer's 2019 fiscal year.

A woman having makeup applied by another woman at a Sephora salon inside a J.C. Penney.

Sephora beauty care has been one of the few things working at the retailer. Image source: J.C. Penney.

Dealt a weak hand

Soltau doesn't have an easy job in front of her, not least because other executives are starting to bail as well. Ellison took J.C. Penney's chief customer officer with him to Lowe's, and the CFO just left to take the same position at Qurate Retail Group, which owns HSN, QVC, and zulily.

Revenues at J.C. Penney tumbled 7.5% in the second quarter to $2.67 billion, leading to a net loss of $101 million. The retailer's stock has plunged as its troubles mounted, with shares down 53% over the past year and having lost more than 80% of their value since early 2016. The stock currently trades at just over $1.60 per share.

Much of the blame for J.C. Penney's predicament has been placed on former CEO Ron Johnson, who tried to drag the old-line retailer into the 21st century by modernizing its operations and updating its look. But the declining sales only accelerated after his policies were implemented, and the hemorrhaging didn't stop until Johnson was ousted and most of his ideas were reversed.

Ellison was brought in to be a steady hand on the tiller, and he brought back appliances after a 30-year absence, bolstered the home department, focused more on beauty, and worked to fix the women's fashion business. It hasn't been enough, however, and Soltau now has the difficult task of working from a weakened financial position.

J.C. Penney has nearly $4 billion in long-term debt but just $182 million in cash and equivalents. In contrast, while Kohl's has $2.2 billion in long-term debt, it also has $1 billion in cash and equivalents. At $5.5 billion, Macy's has more debt than either, but it has more than $1 billion in readily available cash.

New blood, new ideas

It's not completely J.C. Penney's fault, as retailers are still adjusting to the impact Amazon.com and e-commerce have had on the landscape, but Kohl's and Macy's seem to have adapted better to the new environment. Kohl's has partnered with Amazon to feature its products in its stores while also serving as a returns drop-off point for purchases made online. Macy's has opened a chain of discount stores as it tries to harness the power of a popular trend in retailing.

Although it is important that J.C. Penney got someone into the CEO position in time for the Christmas shopping season, Soltau's influence over the retailer's performance for the period is likely going to be little at this late stage. There might be nothing anyone could do to change the department store chain's course.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Lowe's. The Motley Fool has a disclosure policy.