After the close, some big news hit the wire from J.C. Penney (NYSE:JCP) – from the press release:
The Board of Directors of J.C. Penney Company, Inc. today announced that Myron E. (Mike) Ullman, III has rejoined the Company as Chief Executive Officer, effective immediately. He has also been elected to the Board of Directors. Mr. Ullman is a highly accomplished retail industry executive, who served as CEO of jcpenney until late 2011. He succeeds Ron Johnson, who is stepping down and leaving the Company.
Thomas Engibous, Chairman of the Company’s Board of Directors, said, “We are fortunate to have someone with Mike’s proven experience and leadership abilities to take the reins at the Company at this important time. He is well-positioned to quickly analyze the situation jcpenney faces and take steps to improve the Company’s performance.”
Mr. Ullman added, “While jcpenney has faced a difficult period, its legacy as a leader in American retailing is an asset that can be built upon and leveraged. To that end, my plan is to immediately engage with the Company’s customers, team members, vendors, and shareholders, to understand their needs, views, and insights. With that knowledge, I will work with the leadership team and the Board to develop and clearly articulate a game plan to establish a foundation for future success.”
Mr. Engibous added, “On behalf of the Board of Directors, we would like to thank Ron Johnson for his contributions while at jcpenney and wish him the best in his future endeavors.”
This is a huge blow, and far from good news. Clearly, the board decided that “Home” would not be do or die for Johnson as I recently assumed – the pricing disaster was enough to end his short tenure as the CEO of JCP (assuming early shops data is in-line with previous reports). This leaves plenty of questions to be answered – none of which are adequately addressed in the press release. The company’s plan from this point on is anybody’s guess; strategically, I have no idea what lies ahead for JCP.
As noted in the proxy from a few days ago, Mr. Johnson never entered into an Executive Termination Pay Agreement at JCP; he will walk away from the company with less than $150,000 – the majority of which is simply part of a non-qualified defined contribution plan.
I really have to question the thinking by the board; if this is the conclusion, why wasn’t it made PRIOR to investing in initial construction for the most significant piece of Mr. Johnson’s vision? I’m truly flabbergasted by the timing. I’ll have more to say once we get some additional color on what management plans to do from this point forward; I continue to hold my position in JCP.
About the author:
As it relates to portfolio construction, my goal is to make a small number of meaningful decisions. In the words of Charlie Munger, "Patience followed by pretty aggressive conduct."
I run a concentrated portfolio, with a handful of positions accounting for the majority of my equity holdings (currently two). From the perspective of a businessman, I believe this is adequate diversification.