By Suzanne Kapner and Sarah Nassauer
J.C. Penney Co., struggling to reverse its decline, is losing
its chief executive to Lowe's Co., another retailer trying to fix
itself.
Marvin Ellison, who joined Penney in 2014 and became CEO the
following year, shifted the department-store chain away from
apparel toward appliances. Last year, he closed more than 100
stores and slashed jobs. But the company's sales have sputtered,
and its once-iconic stature has diminished as losses have piled
up.
Lowe's, meanwhile, has been searching for a new CEO to boost
results at the home-improvement chain, which faces pressure from an
activist investor as it labors to keep pace with the rapid revenue
gains at Home Depot Inc.
"This is arguably the most challenging and competitive retail
market that we've seen in over 50 years," Mr. Ellison told analysts
last week on a conference to discuss Penney's quarterly earnings.
He previously worked at Home Depot. and Target Corp.
Many traditional chains like Penney continue to struggle as
spending moves to the web and Amazon.com Inc. squeezes retailing
profits. Toys 'R' Us Inc. is liquidating all its U.S. stores and
Sears Holdings Corp. continues to shrink. Nine West and Claire's
Stores filed for bankruptcy protection in recent months.
The strong U.S. economy and low unemployment are helping some
big chains that have managed to close weaker locations, invest in
store improvements and capture more online orders. Last week,
Walmart Inc. and Macy's Inc. reported rising same-store sales for
the latest quarter.
On Tuesday, Lowe's said it had hired Mr. Ellison and he would
join the seller of paint and plywood on July 2. Penney shares fell
6% to $2.35 while Lowe's shares slipped 1.9% to $85.75.
"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. His "exit will also raise speculation that he is not
particularly optimistic about the future prospects of JCP," Mr.
Saunders said.
Mr. Ellison, 53 years old, is jumping to a much bigger company.
Lowe's takes in more than five times as much revenue as Penney, and
its market capitalization of roughly $73 billion compares with less
than $1 billion for the department-store chain.
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. Its board
elected lead director Ron Tysoe chairman, replacing Mr.
Ellison.
Mr. Ellison joined Penney when it was in crisis following former
CEO Ron Johnson's failed experiment to revamp the 116-year-old
chain. While Mr. Ellison stabilized sales, the company remains
challenged, which could complicate efforts to find a new CEO. It is
carrying a hefty debt load and is unprofitable. It lost $78 million
in the most recent quarter, compared with a $187 million loss a
year earlier.
Penney's same-store sales for the three months to May 5 rose a
scant 0.2%, short of the company's expectations and strong results
from rivals such as Macy's.
Some analysts had become disillusioned with Mr. Ellison's plan
for turning around Penney, noting he was shifting into lower margin
categories like appliances without fixing the chain's core apparel
business.
"This marriage needed to come to an end sooner rather than
later," Charles Grom, an analyst with Gordon Haskett Research
Advisors, wrote in a note to clients.
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
criticisms from activist investor D.E. Shaw & Co. that Lowe's
had underperformed Home Depot in recent years.
Lowe's was set to release its first-quarter results Wednesday
morning. In February, the Mooresville, N.C.-based chain reported
falling sales and lower-than-expected earnings for its fiscal
fourth quarter.
The retailer 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, ending 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.
Mr. Ellison is expected to draw on his Home Depot playbook to
improve Lowe's customer service, online presence and professional
business, said people familiar with the matter.
At Home Depot, for example, Mr. Ellison had sales associates
wear bright orange vests to make it easy for shoppers to
differentiate them from employees doing other tasks and decided
employees shouldn't stock shelves during the busiest hours, the
people said.
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.
--Cara Lombardo 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 18:01 ET (22:01 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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