OPERATIONS

Johnson out as CEO of J.C. Penney; Ullman back

BY Marianne Wilson

New York — After a controversial 17-month stint, Ron Johnson is out as CEO of J.C. Penney. The company’s board said on Monday that Johnson will be replaced by Myron E. Ullman III, who had been CEO at Penney for seven years until Johnson took over in late 2011. Ullman has also been elected to the board of directors.

The decision of the Penney board to replace Johnson with his embattled predecessor brought biting criticism from some retail investors and corporate governance experts. Many analysts blamed Ullman for creating the problems that Johnson was brought in to correct. In a statement, the board said it chose Ullman because he was well-positioned to move quickly and improve sales.

Johnson’s departure was not all that unexpected given the chain’s mounting losses and sales declines. But it was still a stunning reversal of fortune for the former golden boy of Apple, who left the tech giant amid great fanfare for the top job at Penney.

Johnson’s brief tenure at the department store chain was marked by what many industry analysts felt were strategic missteps, from his decision to jettison sales and coupons to his pact with Martha Stewart, which embroiled Penney in its ongoing legal mess with Macy’s. But more than anything, it was the chain’s declining fortunes that did him in.

Penney reported a net loss of $985 million for fiscal year 2012 — its first full year under Johnson — compared to a $152 million loss the year before. Annual revenue dropped 25% to $13 billion. The crucial fourth quarter was a disaster: The company’s net loss widened to $552 million from $87 million a year earlier and revenue fell 28.4% to $3.8 billion. Same-store sales plummeted 31.7% and Internet sales fell 34.4%.

In recent weeks, criticism of Johnson’s performance had reached not only a crescendo, but an apparent tipping point as investors and the Penney board started to lose faith. On Friday, William Ackman, whose Pershing Square Capital Management is the chain’s largest investor and the man who personally recruited Johnson to Penney, publicly criticized the chief executive. Speaking at an investor conference in Boston, Ackman said Penney’s has seen “too much change too quickly without adequate testing” and that Johnson’s reinvention of Penney had been “very close to a disaster.”

In early March, Vornado Realty Trust, formerly the retailer’s second-biggest shareholder, sold off nearly half its stake in the company.

When Johnson, the former SVP of retail at Apple, took the reins in November 2011, Penney was struggling with a dowdy, outdated image and declining sales. In January 2012, Johnson unveiled a bold and ambitious strategy to transform Penney from a traditional department store into a huge specialty store made up of some 100 branded shops, with wide aisles and a town square-styled area in the middle of the space.

He also rolled out a new pricing format, replacing the chain’s blizzard of sales and coupons with a three-tiered strategy that promised permanently lowered prices on all items, month-long sales on select goods and periodic clearance events throughout the year. But customers didn’t go for it and the number of customers visiting the stores — and sales — plunged. Johnson subsequently tweaked the pricing strategy and, most recently, announced the return of regular sales and coupons.

Johnson had been hopeful that sales would improve this year as he rolled out more in-store branded boutiques and the new merchandise hit the shelves. But his efforts were bringing mixed results. Over the past weekend, the chain’s highly touted new home shops were void of shoppers, the Dallas Morning News reported.

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OPERATIONS

Macy’s, Martha Stewart and J.C. Penney back in court

BY Marianne Wilson

New York — The fight over Martha Stewart resumed with both Macy’s and J.C. Penney Co. back in a New York court on Monday. The trial, over whether Macy’s has an exclusive right to sell select Martha Stewart home goods items, resumed after a month-long mediation effort failed to yield a settlement.

On Monday, Macy’s alleged Penney has begun selling some items on its website that infringe on Macy’s exclusive deal with Martha Stewart.

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Reports: Costco looks to develop e-commerce in China

BY Alaric Dearment

New York — Costco Wholesale appears to be eyeing China’s online commerce market, according to published reports.

The Southern Metropolis Daily, a newspaper based in the southern Chinese city of Guangzhou, reported Thursday that the Issaquah, Wash.-based club retailer was interested in entering the country’s e-commerce market and was in the process of looking for local partners.

The chain currently doesn’t operate stores in mainland China, but has nine locations in Taiwan. Walmart and French mass-merchandise chain Carrefour also have a long-standing presence in the mainland.

The newspaper reported that Costco was attracted by the growth of China’s e-commerce market, which in 2012 reached $193.4 billion, making it the world’s second largest after the United States.

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