Penney board enters fray, defends against Ackman-proposed CEO ouster
New York City — Scathing letters continued flying back and forth on Friday, between activist investor Bill Ackman and the J.C. Penney board of directors — each attacking the other’s handling of the CEO search process and timing.
Then, CNBC reported that Perry Capital, a 7% Penney stakeholder, has weighed in as well, and will file a 13-D urging the board to immediately remove Mike Ullman as CEO, and replace his leadership with Allen Questrom as chairman and Footlocker’s Ken Hicks as CEO.
Perry’s position follows Thursday’s written statement by Pershing Capital’s Ackman, asking for Ullman’s ouster and suggesting that former Penney CEO Questrom would return as chair if he “likes the new CEO choice.”
The board isn’t taking the pressure lying down. After a second Ackman letter in two days, Thomas Engibous, Penney’s chairman, issued the following response: "The board is focused on the important work of stabilizing and rejuvenating the business. It is following proper governance procedures, and members of the Board have been fully informed and are making decisions as a group. This includes the CEO search process, which is being conducted at an appropriate pace. The board also continues to actively oversee management as it conducts the important work underway to rebuild the company. Mr. Ackman’s statements are misleading, inaccurate and counterproductive."
Wall Street has characterized the back-and-forth between board and stakeholders as a distraction from a much-needed turnaround. This is “just what J.C. Penney does not need,” said one analyst. Others have said that Ullman — reappointed to the chief post in April — simply hasn’t been given enough time to effect meaningful change. However, Citigroup’s Deborah Weinswig wrote that the company needs a “dream team,” and that Questrom and Hicks appear to be just that.
In follow-up to his Thursday letter, Ackman released a second letter on Friday morning, saying that he had “lost confidence” in chairman Engibous, and recommending a boardroom coup that would remove Engibous in addition to Ullman, and put in Questrom.
“Mike was hired by this board as an interim CEO,” wrote Ackman. “He has not acted like one. “We are now flying blind,” he wrote.
Ackman, whose Pershing Square Capital Management owns almost 18% of J.C. Penney’s stock, has reportedly threatened to sell his stake if the board doesn’t take his side in the feud.
Marc Jacobs opens debut beauty store
New York City — Fashion retailer Marc Jacobs will enter the beauty category with his first store dedicated to cosmetics and beauty items.
The nearly 500-sq.-ft. store has opened at 385 Bleecker Street in Manhattan and, according to a Women’s Wear Daily report, will showcase the designer’s 121-SKU color cosmetics collection, as well as his fragrances with Coty Prestige.
The Manhattan space was once used by Jacobs as an accessories store, according to WWD, but has been remade in a jewel-box design to serve as a backdrop to cosmetics. Makeup artists, trained at Sephora University, will work with clients, and the custom-designed fixtures will appear in 11 additional Marc Jacobs locations in Bal Harbour, Fla.; Boston; Chicago; Las Vegas; Los Angeles; New York; Provincetown, Mass.; San Francisco, and Savannah, Ga.
Soft sales don’t deter Advance Auto’s expansion agenda
Advance Auto Parts announced plans to open its 4,000th store on Friday, one day after reporting disappointing sales at its 3,999 locations.
Total sales for the second quarter increased 6.1% to $1.55 billion due largely to the addition of 175 new locations. However, same store sales declined 0.3% on top of a prior year decline of 2.7%.
“We are pleased with our profit improvement despite our comparable store sales being essentially flat,” CEO Darren Jackson said. “The positive comparable sales growth at the start of the quarter was offset by weaker demand in the balance of the quarter including sales shortfalls in key seasonal categories. While the macroeconomic environment continued to impact our customers we continue to be encouraged by the strong long-term fundamentals of our industry and remain focused on improving our sales performance as we continue to improve our profitability.”
Profits increased 17.3% to $116.9 million, compared to $99.6 million. The improved profit performance was driven by sales of higher margin products and strong expense control as SG&A costs declined to 37.7% of sales from 38.3% the year earlier. The 58 basis-point decrease was primarily driven by the timing of last year’s company-wide leadership meeting, lower marketing expense, increased labor productivity and lower credit card fees as a result of the insourcing of the company’s commercial credit program.
“We are pleased that we were able to exceed our profit expectations for the quarter,” said Mike Norona, executive VP and CFO. “Despite softer sales than we expected in the back half of the quarter, our gross profit improvements and disciplined focus on expense management allowed us to increase our earnings per share 18.7% and our operating margins by 98 bps during the quarter. Our long-term operating income rate goal is to achieve 12% and our progress in the quarter is a solid step in the right direction.”
The 4000th store is set to open on August 14 in Montgomery, N.Y.