No quick fixes expected at J.C. Penney from returning CEO

Tue Apr 9, 2013 9:44am EDT
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By Phil Wahba

(Reuters) - Myron Ullman's return to the helm at J.C. Penney Co Inc (JCP.N: Quote) unnerved investors on Tuesday, as analysts said his experience was welcome but was not a cure-all for the retailer's sliding sales and dwindling cash.

Shares were down 7 percent to $14.75 in early trading. They rose almost 11 percent late Monday after Penney confirmed it had ousted Ron Johnson as chief executive, but the stock slid when the company said Ullman was back.

Ullman was CEO from 2004 to 2011, before being replaced by Johnson, whose decision to remove coupons and discounts in favor of it called everyday low pricing last year, which led to a 25 percent drop in sales in 2012.

As much as many on Wall Street were clamoring for Johnson's ouster, analysts warned that Ullman's return was not a solution as he tries to win back shoppers, mollify worried vendors and decide whether to forge ahead with some aspects of Johnson's strategy.

"Ullman makes sense in the interim, given the urgent cash situation. Ullman is also a known partner to the vendors," UBS analyst Michael Binetti wrote in a note on Tuesday.

In addition to the pricing strategy, Johnson's plan to remake Penney included the roll-out of branded boutiques within stores - an expensive proposition that many observers expect Ullman to scale back to conserve cash since store remodeling eats up cash.

Under Johnson, Penney opened shops for fashion brand Joe Fresh and last week launched the first two shops in its revamped home section, long Penney's weakest business.

But Binetti and others questioned the popularity of the boutiques. Barclays Capital credit analyst Hale Holden said after a visit to a New York City store last weekend that the more traditional offerings were attracting the bulk of the traffic.   Continued...

JC Penney Chairman and Chief Executive Officer Myron Ullman speaks during the meeting of the Wall Street Journal CEO Council in Washington in this November 16, 2010 file photo. REUTERS/Jonathan Ernst/files