J.C. Penney Co. made a radical break with tradition by hiring Silicon Valley wunderkind Ron Johnson as chief executive officer. With Johnson gone, the chain may have to pursue even more radical options, such as selling itself.
After suffering a 25 percent annual sales decline, J.C. Penney yesterday ousted Johnson, 54, and replaced him with his predecessor, Myron E. Ullman III, 66. Investors, who pushed the shares up 13 percent on news that Johnson was out, abruptly sold after learning Ullman was the new CEO. J.C. Penney dropped 8.3 percent to $14.55 at 7:47 a.m. in New York.
Johnson made a series of splashy announcements. One of the first was that J.C. Penney was taking a 17 percent stake in Martha Stewart Living Omnimedia Inc. with the aim of selling the lifestyle doyenne’s products. The bet later soured when Macy’s Inc., which already had an exclusive deal to sell Stewart-branded merchandise, sued J.C. Penney. The two sides continued to battle in a New York court yesterday.
Ackman spent more than $1 billion to acquire 39 million common shares at an average cost of about $25.90 each. Pershing Square later raised its economic stake by entering into swap contracts on an additional 15.9 million J.C. Penney shares that would require the hedge fund to pay out cash to the extent the retailer’s stock price fell below $26.14.