(Rewrites throughout.)
By Elizabeth Holmes and Joann S. Lublin
Of THE WALL STREET JOURNAL
J.C. Penney Co. is tapping Ron Johnson, head of Apple Inc.'s
iconic retail stores, as its new president and next chief
executive.
Johnson, 52 years old, will become CEO in November, succeeding
long-time leader Myron "Mike" Ullman. Ullman, who has been CEO and
chairman for six and a half years, will become executive
chairman.
The rare poaching of a top executive from Apple was kick-started
by a pair of activist investors who amassed 26% of J.C. Penney's
stock last year. The investors -- William Ackman of Pershing Square
Capital Management and Steven Roth of Vornado Realty Trust -- won
spots on Penney's board and suggested bringing Johnson on as a
director as well.
J.C. Penney had reached out to Johnson three or four years
earlier, but he was too involved with Apple. The board seat got
Johnson interested, and eventually the conversation turned to more
serious discussions about bringing him in as the company's next
CEO, Ullman and Johnson said in an interview.
The appointment could prove lucrative for Johnson, but he's
taking on a big risk that he can improve the value of J.C. Penney's
stock.
In filings Tuesday, J.C. Penney said it would issue Johnson
stock to compensate him for the $50 million in soon-to-vest equity
awards he will leave behind at Apple. But Johnson will then turn
around and pay just under $50 million -- or $6.89 a share -- for
warrants to buy 7.26 million shares of Penney stock.
The warrants can be exercised six years from now at $29.92 a
share, which could mean a big payday for Johnson if he can get the
stock up but puts his $50 million at risk if he can't. Johnson will
also get a salary of $1.5 million and a shot at an annual
bonus.
The move is a coup for J.C. Penney, a middle-of-the-road chain
of 1,100 department stores that faces stiff competition from Macy's
Inc. (M) and Kohl's Corp. (KSS) Total sales last year reached $17.8
billion, up 1.2% from 2009 though still well below its
pre-recession levels. The company's stock jumped more than 17%
after the announcement.
With his appointment, Johnson will be the latest executive to
try his hand at reinventing the tired department-store retail
experience. He won kudos for reimagining the concept of the retail
store at Apple, whose outlets have become one of the most popular
destinations in an otherwise barren mall landscape.
Apparel retailers have long admired Apple's store environments,
including their spare, uncluttered layout and use of handheld
checkout devices. It's a sharp contrast to department stores, which
have been criticized for their sprawling layouts, dowdy merchandise
and tired facades.
Johnson joined Apple in 2000 and has since opened more than 300
stores for the company. He came from Target Corp. (TGT), where he
was vice president of merchandising for stores.
-By Elizabeth Holmes and Joann S. Lublin, The Wall Street
Journal; elizabeth.holmes@wsj.com