J.C. Penney dispute ends as Ackman resigns from board

J.C. Penney's largest shareholder, William Ackman, has resigned, and the struggling company hopes it now can refocus its attention on its recovery. The move marks the end of a public back-and-forth between Ackman and J.C. Penney's leadership.

Pawel Dwulit/The Canadian Press/AP/File
William Ackman, J.C. Penney's largest shareholder, has resigned from the company's board as part of a deal to resolve an unusually public battle between the activist investor and the struggling department store operator.

Bringing a public spat over one of the nation’s 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 — 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.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.