October 13, 2014
Ronald Friedman, Co-Leader, Retail/Consumer Products Industry Group, Quoted in Fortune Article, "5 Things the Next J.C. Penney CEO Will Absolutely Have To Do."
By Phil Wahba & Jennifer Reingold
Marvin Ellison has his work cut out for him, needing to re-think everything from store-count to merchandising.
After a year-long search, J.C. Penney finally named a new CEO on Monday: Marvin Ellison, the executive in charge of Home Depot's U.S. stores.
Ellison, an operations and logistics expert overseeing a fleet of almost 2,000 stores, will start on November 1, as president, when he begins a nine-month apprenticeship under the tutelage of Penney veteran CEO Mike Ullman. Ellison will then take sole control of the reins in August 2015. (Ullman, who was CEO from 2004 to 2011 only to return in April 2013 to save the company after Ron Johnson nearly killed Penney with his plan to make it trendier, will then stay on for a year as Executive Chairman.)
The changing of the guard is being announced at a time Penney's financial situation has stabilized after losing billions in sales, and business has begun to recover, albeit slowly. Indeed, Wall Street still has its doubts about Penney's turnaround: the stock tanked 20% in the two days after the retailer lowered its sales forecast last week at its analyst day. In a sign of how far from recovery Penney still is, the company only expects sales to hit $14.5 billion in 2 years, well below where they were when Johnson became CEO three years ago.
Though Ullman told reporters last week he had no plans to carry out a wholesale campaign of store closings saying that by and large, current stores contribute to its revenue and profit. Still, many in the industry wonder how Penney can afford to have roughly the same size fleet as it did 8 years ago with only two-thirds the revenue. So analysts say Ellison will have to close stores, particularly in so-called C-malls, emporia that generate lackluster sales per square feet.
"It is imperative to keep closing weak, underperforming stores, and get rid of the dogs in the C-malls," said Ron Friedman, a partner at accounting firm Marcum LLP.