BIZMOLOGY — Just how bad have things gotten for struggling department store operator J. C. Penney? When a rumor began circulating that its CEO Ron Johnson had left the company, the stock shot up 6% yesterday. A story in today’s New York Post reports that Penney had to release a statement saying Johnson has “no immediate plans” to step down to quell the rumor. That sent the shares tumbling back down. Apparently, investors believe the ailing retailer is better off without him.
What a disappointment Johnson has been. Recruited from Apple — where he masterminded the wildly successful Apple retail stores — in late 2011 to reverse Penney’s decline, Johnson has done just the opposite. Indeed, in 2012 he presided over nearly $1 billion in losses at the 100-year-old company. Penney’s shares have fallen from $35 at the beginning of 2012 to $15 and change today.
Johnson’s radical plan to “simplify” the retailer’s pricing strategy has instead confused and alienated shoppers, who apparently like to shop sales and use coupons. His other efforts to revamp the business — including offering free haircuts for kids — have failed to increase sales. Lately, he’s been embroiled in a nasty triangle with Macy’s CEO Terry Lundgren and domestic diva Martha Stewart over whether or not Penney is entitled to sell her products in its stores. Macy’s sued Stewart’s company, alleging Martha Stewart Living Omnimedia (MSLO) violated a contract with Macy’s when it agreed to provide similar merchandise to Penney. Some observers expressed shock and disbelief when Johnson testified that he didn’t read Macy’s contract with MSLO. Macy’s debonair chief Lundgren is clearly winning the PR war, while Johnson and Stewart, suffice it to say, are not.
What does it mean when the market reacts so positively to the exit (whether real or imagined) of a CEO? It’s clear that some investors have lost patience with Johnson’s to-date unsuccessful efforts to right Penney’s ship. More seriously, they now appear to have lost confidence in the man.