J.C. Penney dispute ends as Ackman resigns from board
Bringing a public spat over one of the nation鈥檚 largest department stores to an end, hedge-fund manager William Ackman resigned from the board of J.C. Penney Co., the company announced Tuesday.
J.C. Penney said it will replace Mr. Ackman 鈥� its largest shareholder 鈥斕齱ith Ronald Tysoe, a retail veteran who spent 16 years at what is now Macy鈥檚, Inc. It will also search for a second director.听
In the months leading to his resignation, Ackman criticized J.C. Penney鈥檚 board for being too slow to replace interim CEO Myron E. Ullman. The company is still reeling from former CEO Ron Johnson鈥檚 failed rebranding effort, which replaced its annual sale events with 鈥渆veryday low pricing鈥� and resulted in $1 billion in lost sales in 2012.
Tensions escalated last week, when Ackman shattered expectations of boardroom privacy by publishing a letter slamming J.C. Penney鈥檚 leadership. Pointing to J.C. Penney鈥檚 plunging revenues, massive layoffs, and struggle to regain customers, Ackman demanded the board find a new Chairman and CEO within the next 30 to 45 days.
"Penney is at a very critical stage in its history, and its very existence is at risk," Ackman said in the letter.听"I have lost confidence in our chairman's ability to oversee this board."
The move ignited a back-and-forth quarrel in the press. The board听released a statement of its own calling Ackman 鈥渄isruptive and counterproductive.鈥�
With Ackman gone, J.C. Penney reiterated its 鈥渙verwhelming support鈥� for Chairman Thomas Engibous and Mr. Ullman.
The two executives 鈥渉ave been working tirelessly to position the company for future success,鈥� the board said in a statement Tuesday. 鈥淭his important work has included stabilizing the company鈥檚 operations and financial position, restoring confidence among vendors, and taking steps to get customers back into sales.鈥�
Ackman said in a statement that his resignation and the addition of two new directors would be 鈥渢he most constructive way forward for J.C. Penney and all other parties involved.鈥�
J.C. Penney has struggled to right itself amid turbulent changes in company leadership. Ullman first served as CEO from 2004 to 2011 before being ousted, in part by Ackman. His replacement: former Apple Inc. executive Ron Johnson, who had successfully developed Target鈥檚 鈥渃heap chic鈥� image and was expected to revitalize J.C. Penney.
Instead, Johnson鈥檚 moves to cut J.C. Penney鈥檚 sales and fill clothing racks with designer brands like Betsey Johnson ultimately alienated 鈥斕齟ven baffled 鈥� J.C. Penney鈥檚 price-conscious customers. The company reported seeing sales shrink 25 percent that year, and by April, brought Ullman back to replace Johnson.
In the months since Johnson鈥檚 departure, J.C. Penney has struggled to draw its customers back, apologizing to shoppers who left en masse after its marketing missteps.
鈥淐ome back to J.C. Penney. We heard you; now, we鈥檇 like to see you,鈥� said a nationally broadcasted television ad that stopped just short of begging shoppers to return.
The company is still far from the safe zone. In May, J.C. Penney reported a bigger earnings loss than expected. Retail analyst Walter Loeb told Reuters he expects the company鈥檚 second quarter results, which will be released next Tuesday, to be disappointing also.
Still, Ullman has told analysts he is intent on bringing J.C. Penney back with aggressive advertising campaigns and discounting events. A company spokesperson told Reuters that it would continue searching for Ullman鈥檚 eventual successor, although it remains to be seen how much longer Ullman will remain at the company鈥檚 helm.
As for Ackman, his resignation may have some personal benefit. Ackman has lost more than $600 million on his investment in J.C. Penney. With his newly-gained outsider status, he may now have more freedom to sell his stake in the company and recoup his losses.
