J.C. Penney Co. Inc.’s (NYSE: JCP) Myron E. (Mike) Ullman III began the ruin of the retailer that his successor as chief executive, Ron Johnson, who was just fired, continued. Given his record, Ullman’s return to the retailer should be considered another disaster in a long line of disasters at J.C. Penney.
The news media has pointed out that the board was irresponsible to retain Ullman again. One of the reasons given for the board’s actions was that it could find no one else to take such a challenging job. The other is that J.C. Penney will be sold soon, so its hardly matters who is CEO.
The excuse that Ullman was the board’s only choice should be rejected. Tim Nichols, who runs the company’s stores, and Liz Sweney, chief merchant, have watched Johnson’s mistakes and learned from them. Even board member Leonard Roberts, former head of RadioShack Corp. (NYSE: RSH) would have been preferable. The electronics retailer was troubled, but Roberts has no legacy record with J.C. Penney. Wall St. would have more confidence in an executive or a board member who has spent time at the company recently than Ullman, who left J.C. Penney in disgrace.
If the company is to be sold, Chairman Thomas Engibous could have taken the reins in the meantime. The former CEO of Texas Instruments (NASDAQ: TXN), he at least has experience operating a large public company.
Under Ullman, shares of J.C. Penney dropped 60%. Revenue was $18.5 billion five years ago. Net income was $572 million. The company has not posted numbers that strong since.
Johnson will be long gone before Ullman sets a new strategy for J.C. Penney. The least the board could do is to put someone in place who would have given investors hope, instead of a primary architect of J.C. Penney’s demise.
J.C. Penney has violated one of Wall St.’s primary rules. CEOs who leave because they lacked merit as operators should never return to a company, no matter how desperate its board is.
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