J.C. Penney said it will replace Mr. Ackman — its largest shareholder — with Ronald Tysoe, a retail veteran who spent 16 years at what is now Macy’s, Inc. It will also search for a second director.
In the months leading to his resignation, Ackman criticized J.C. Penney’s board for being too slow to replace interim CEO Myron E. Ullman. The company is still reeling from former CEO Ron Johnson’s failed rebranding effort, which replaced its annual sale events with “everyday low pricing” 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’s leadership. Pointing to J.C. Penney’s 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. "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 released a statement of its own calling Ackman “disruptive and counterproductive.”
With Ackman gone, J.C. Penney reiterated its “overwhelming support” for Chairman Thomas Engibous and Mr. Ullman.
The two executives “have been working tirelessly to position the company for future success,” the board said in a statement Tuesday. “This important work has included stabilizing the company’s operations and financial position, restoring confidence among vendors, and taking steps to get customers back into sales.”
Ackman said in a statement that his resignation and the addition of two new directors would be “the most constructive way forward for J.C. Penney and all other parties involved.”
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’s “cheap chic” image and was expected to revitalize J.C. Penney.
Instead, Johnson’s moves to cut J.C. Penney’s sales and fill clothing racks with designer brands like Betsey Johnson ultimately alienated — even baffled — J.C. Penney’s 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’s departure, J.C. Penney has struggled to draw its customers back, apologizing to shoppers who left en masse after its marketing missteps.
“Come back to J.C. Penney. We heard you; now, we’d like to see you,” 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’s 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’s eventual successor, although it remains to be seen how much longer Ullman will remain at the company’s 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.