An indication of how far Johnson had fallen came in Penney’s statement revealing the management change. Johnson was not quoted, while the board simply said he was “stepping down and leaving the company.”
Chairman Thomas Engibous said, “On behalf of the board of directors, we would like to thank Ron Johnson for his contributions while at J.C. Penney and wish him the best in his future endeavors.”
Egnibous described Ullman as “well-positioned to quickly analyze the situation J.C. Penney faces and take steps to improve the company’s performance.”
It will be quite an uphill climb. Penney’s lost $985 million last year as sales fell 24.8 percent to $12.99 billion. Shares of the company fell 50 percent to $15.87 during Johnson’s tenure, leaving the company with a market capitalization of just $3.49 billion — well below that of competitor Kohl’s Corp. at $10.66 billion and Macy’s Inc. at $17.13 billion.
Ullman said he was contacted by Penney’s chairman over the weekend, given a couple of days to discuss with his wife whether he wanted to return, and found himself back in the role on Monday. “I have six kids and I sit on six boards,” he said. “There were a lot of things we had to consider. My instinct was, I would love to take the job, but let me discuss it with my wife.”
Asked when he starts, Ullman, displaying his usual wry humor, said, “I guess tomorrow. Maybe today. I don’t know.”
Penney’s said in a regulatory filing that Ullman, 66, will get a base salary of $1 million to lead the retailer.
Shares of Penney’s gained ground in after-hours trading Monday as word spread that Johnson was out. The stock, however, reversed course and fell 6.9 percent to $14.78 when Ullman was named Johnson’s successor.
Since leaving Penney’s on Jan. 27, 2012, Ullman said he did not make one phone call to the company, nor did he seek any information of the sort a former ceo might be curious about. “It’s not helpful to be a critic or stand on the sideline giving advice,” Ullman explained. He said he quickly detached from retailing by going on a cruise the month after he left Penney’s.
Since then, he’s been on a few cruises, and busy on boards, with his family and with charitable causes.
Asked why he decided to return, Ullman replied simply, “Clearly, this was something I couldn’t resist. The franchise is strong. The people want Penney’s to win.”
He said over the weekend he did visit a new Penney’s store in Dallas, but not the prototype that Johnson established there. “The presentation was quite well done. Some of the new ideas that have been implemented look great. The question is how are they performing,” and what is the customer reaction, he added.
Ullman — renowned for his cool-headed, analytical approach to management — said he would build on the successes of the past year or so and learn what went wrong, and start gathering information today at 8 a.m. when he starts work. He said it would be unfair to comment specifically on the company’s condition, pending his analysis.
He did say he would build a new business plan over the next few months, for profitable growth, and will also be involved in succession planning. Similar to many of his past executive positions, such as at LVMH Moët Hennessy Louis Vuitton, Ullman did not sign a contract, so it’s possible he becomes the short-term solution to stopping the hemorrhaging, and comes up with a successor. He was involved in the decision to bring in Johnson and the two spent a few months together at Penney’s working on the reinvention plans.
Ullman is considered one of the smartest and most competitive retail executives in the industry, a strong operations, financial and technology executive, but not of the merchant prince breed. He did bring Penney’s to its historically high level of operating profit, 9.7 percent, and a share price of $88. Another big accomplishment was the rollout of stores, 138 over three years, primarily in off-the-mall locations, and American Express gave the company high ratings for service improvements. RELATED STORY: Macy's-Martha-Penney's Trial Resumes >>
The introduction of Sephora to Penney’s stores was another big win for Ullman, as was the growth of the dot-com business, which doubled in volume to $1.5 billion.
Ullman also launched Penney’s first Manhattan store, which is in the Manhattan Mall, between 32nd and 33rd Streets, and his team added such concepts as Call It Spring shoes, which are made by Aldo; MNG by Mango; Nicole by Nicole Miller; and American Living, which was designed by Ralph Lauren Corp. and discontinued last year. The team also launched Olsenboye by Mary-Kate and Ashley Olsen, and Modern Bride jewelry, and built up private labels, including a.n.a., to add a contemporary flavor to the assortment. Ullman did shut down the catalogue business, which was still profitable but faced with increasing costs, including paper and postage.
In the few seasons before Ullman left Penney’s, there was some slide in sales and profits in the midst of the Great Recession. Despite his accomplishments, Ullman did not leave on a high note. “The recession was extraordinarily difficult for midtier mall-based stores,” Ullman said Monday. “You learn more in the valley than on the mountaintop.…I intend to use this opportunity to keep learning.”
When Ullman joined Penney’s as chairman and ceo in December 2004, succeeding Allen Questrom, the company was already deep into a multiyear turnaround and showing strong results. Questrom had prevented Penney’s from going into bankruptcy. Ullman’s challenge was to sustain the momentum and create more of a buzz around the brand so it resonated louder with a younger crowd and its middle-income audience. With mall development drying up, he executed the off-mall strategy for store growth.
He said that after Questrom rebuilt the team with senior merchants and set a promotional strategy, it was his task to elevate the profitability and target double-digit operating profit. “I felt like we were on the right track. The recession was not kind to moderate department stores.”
He said he would step down from the Saks Inc. board but stay with the Starbucks board, and remain as deputy chairman of the Federal Reserve Bank of Dallas and as chairman of Mercy Ships International.
Reaction to the news of Penney’s change in command was swift, sometimes even before the official announcement went out late Monday afternoon.
“I was not surprised, based on the results,” said Questrom. “I was disappointed they didn’t do it earlier.” Questrom was often quoted in the news media in the past few months, criticizing Johnson and his reinvention strategy and raising the question of why Johnson never tested his concepts first, before rolling them out.
“Let’s face it. The last two years has been at tragic set of events for Penney’s and all of its constituents,” said Howard Schultz, chairman and ceo of Starbucks, who once left the coffee company and returned to turn it around. “The advantage Mike Ullman has is his relationships inside and outside of the company, and his intuitive sense of the brand. He has a running start restoring Penney’s back to its rightful place. He’s got the significant trust and confidence of the employees, and an intuitive sense of what to do and how to do it. This is not an easy task, but he is the perfect person to come back. He didn’t have to. He is coming back because he feels a responsibility. It takes a lot courage to come back.”
“Penney’s needs a new marketing team, a new merchandising team and new sourcing, and they have to revive the morale of the associates,” said retail analyst Walter Loeb, who has been an outspoken critic of Johnson’s strategy. “Mike Ullman can do this. He can pull together a team. Maybe he needs someone like Michael Francis to come back. The marketing has been out of whack with the customer. They have got to get the customer back for the company to survive. It will be a long haul.”
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