LOW Lowes Companies Inc

By Suzanne Kapner and Sarah Nassauer 

Marvin Ellison is quitting his job as chief executive of struggling J.C. Penney Co. to take over leadership of Lowe's Cos., another retailer in need of a revamp.

The retail veteran joined Penney in 2014 and shifted the department-store chain away from apparel toward appliances. Last year, he closed hundreds of stores and slashed jobs. But the company's sales continue to lag behind rivals.

Lowe's, meanwhile, has been searching for a new CEO who can boost results at the home-improvement chain, which faces pressure from an activist investor and hasn't kept pace with the rapid revenue gains at Home Depot Inc.

"This is the most challenging and competitive retail market that we've seen in over 50 years," Mr. Ellison told analysts on a conference call last week to discuss Penney's quarterly earnings. He previously worked at Home Depot and Target Corp.

On Tuesday, Lowe's said it had hired Mr. Ellison and he would join the company on July 2. Penney shares fell 1.4% to $2.47 in early trading, while Lowe's shares were up less than 1% to $87.69.

Mr. Ellison, 53, is jumping to a much bigger company. Lowe's has more than five times as much revenue as Penney. The seller of paint and plywood has a market capitalization of around $73 billion, while Penney's market value has shriveled to under $1 billion.

Lowe's, however, is dwarfed by Home Depot, which has $100 billion in annual sales and is worth more than $214 billion.

Penney, which is based in Plano, Texas, said Tuesday it was launching a search for a new CEO. It created an office of the chairman consisting of the chief financial officer, the chief information officer and other executives who will manage the day-to-day responsibilities until a successor is found.

Mr. Ellison joined Penney when it was in crisis after former CEO Ron Johnson's failed experiment to revamp the 116-year-old chain. While Mr. Ellison stabilized sales, the company continues to face challenges, which could make it more difficult for it to find a new CEO. It is carrying a hefty debt load and it is unprofitable. It lost $78 million in the most recent quarter, compared with $187 million a year ago.

"The turnaround program that Ellison put in place at JCP has partly delivered but is still far from complete," said Neil Saunders, managing director of GlobalData Retail, a consulting firm. The "exit will also raise speculation that he is not particularly optimistic about the future prospects of JCP."

Penney's same-store sales for the three months to May 5 rose 0.2%, below the company's own expectations and less than rivals such as Macy's Inc. and Kohl's Corp., which both reported strong results for the period.

Lowe's said in March that its current CEO, Robert Niblock, would retire after 13 years in the top role. That announcement came one week after three new directors joined the company's board following assertions from activist investor D.E. Shaw & Co. that Lowe's had underperformed Home Depot in recent years.

The retailer is set to report first-quarter results Wednesday morning. In February, the Mooresville, N.C.-based chain reported falling sales and lower-than-expected earnings in its fourth quarter.

Lowe's agreed to pay Mr. Ellison a base salary of $1.45 million and a target bonus of $2.9 million. He will also receive a signing bonus of about $6 million in stock grants and options that will potentially pay out over the next three years. Mr. Ellison earned the same base salary at Penney.

Before joining Penney, Mr. Ellison spent a dozen years at Home Depot. He rose through the ranks and ultimately ended up in the job of executive vice president in charge of the do-it-yourself chain's roughly 2,000 U.S. stores. He was the first African-American to join its senior ranks and left for Penney after missing out on the top job at Home Depot.

He grew up in a segregated rural Tennessee town with four brothers and three sisters. His parents were sharecroppers before joining together with their children in the 1970s to form the Ellison Family Gospel group, which recorded four albums. He graduated from the University of Memphis and got his M.B.A. from Emory University.

On Tuesday, Lowe's also appointed Richard Dreiling, a director since 2012, as chairman, starting in July. Mr. Dreiling was previously chief executive of discount chain Dollar General.

--Imani Moise contributed to this article.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

May 22, 2018 11:03 ET (15:03 GMT)

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