JC Penney CEO Quits, a Huge Blow to Retailer, Questions About Survival

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J.C. Penney Co. Inc.’s (NYSE: JCP) CEO quit today, shortly after the retailer reported poor results. Marvin R. Ellison, board chair and chief executive, almost certainly knew about this when he was on the earnings call.

According to J.C. Penney:

Ellison has notified the Company of his decision to resign from his role to pursue another opportunity with Lowe’s Companies, Inc. While Ellison will remain a director and CEO through June 1, he will step down from his position as chairman of the board effective immediately. The board of directors has elected current Lead Independent Director Ronald W. Tysoe as Chairman of the Board and has created an Office of the CEO, which will be comprised of Chief Financial Officer Jeff Davis, Chief Customer Officer Joe McFarland, Chief Information Officer and Chief Digital Officer Therace Risch and Executive Vice President of Supply Chain Mike Robbins. These four leaders will share equal responsibility for the Company’s day-to-day operations until a new CEO is appointed. A search committee has been formed to conduct a search for a chief executive officer at JCPenney.

Poor results pushed the stock down last week:

Adjusted net loss was $69 million, or ($0.22) per share, for the first quarter this year compared to adjusted net income of $2 million, or $0.01 per share, for the first quarter last year. Adjusted net loss/income for the first quarter of 2018 and 2017 included the sale of operating assets, which totaled $17 million, or $0.05 per share, and $117 million, or $0.38 per share, respectively.

Its forecast was even worse:

The Company has revised its 2018 full year guidance, which reflects only the impact of the adoption of new revenue recognition and pension accounting standards, as follows:

Comparable store sales: expected to remain at 0.0 % to 2.0 %; and
Adjusted earnings per share: now expected to be ($0.07) to $0.13.

The departure means that a new CEO may have to set a new course for J.C. Penney to survive.