While many retailers have struggled in recent years, J.C. Penney's (JCPN.Q) travails have been notably severe. The stock is down a whopping 95% over the last decade, indicating that in the eyes of investors, the department store is a mere shell of its former self. Though J.C. Penney still has more than 860 stores across the country, there's little question that the underlying business has faded considerably.
J.C. Penney's troubles began when it tapped Ron Johnson as CEO to revamp the stores in 2011. Johnson, who came to J.C. Penney after running Apple's retail stores, attempted a brand overhaul that alienated the company's customers who were accustomed to things like regular discounts. As a result, comparable sales fell around 25% that year and have never really recovered.
J.C. Penney showed Johnson the door after 17 months as CEO and brought back former CEO Myron Ullman as interim CEO. Ullman helped stabilize the business, but he was replaced by Marvin Ellison in August 2015. Having come from Home Depot, Ellison launched appliance sales and initiatives around home improvement such as window treatments and flooring, but he failed to return the company to profitability. He abruptly left to become CEO of Lowe's in May of this year.
Now J.C. Penney has tapped Jill Soltau to be the company's next chief executive, starting Oct. 15.
Image source: J.C. Penney.
Searching for a heroine
Soltau brings an impressive resume to J.C. Penney. She was most recently president and CEO of JOANN Stores, the nation's largest crafts and fabric retailer, with 850 locations nationwide. According to J.C. Penney, "Under Soltau's leadership, JOANN Stores has undergone a revitalization of branding, expanded digital and omnichannel capabilities and forged strategic partnerships to build meaningful relationships with its customers."
Prior to running JOANN, Soltau spent eight years at Shopko, a department store chain in the Midwest and West, as executive vice president and chief merchandising officer, and she also worked for Sears, Kohl's, and Saks Fifth Avenue.
Soltau clearly has a difficult job ahead of her. Not only is J.C. Penney operating at a loss, but it also has billions of dollars in debt to service, and there's been a notable exodus from the executive ranks. In addition to Ellison's departure, CFO Jeffrey Davis left the company just last week, a little more than a year after the company's previous CFO, Ed Record, said he would step down. Such a pattern can signal either poor management, infighting, or simply that executives believe they're on a sinking ship, which could be the case with J.C. Penney. The revolving door in the executive suite illustrates that turning around the struggling department store chain has proven to be a daunting, if not impossible, task.
A feather in her cap
Soltau seems better suited to the job than her predecessors, however, as her experience is considerably more relevant. Unlike Johnson, who came from Apple, or Ellison with his experience in home-improvement retail, Soltau's background at Shopko and JOANN seems directly related to J.C. Penney as those businesses cater to similar customers. The average Apple or Home Depot customer is much different from J.C. Penney's target market of middle-aged women, which partly explains Johnson's and Ellison's errors in their time at the helm of the department store chain.
Seventy percent of J.C. Penney's customers are women, and its most successful recent initiatives like its Sephora expansion, InStyle hair salons, and even the appliance launch have been geared toward women. It makes sense, then, to put a woman in the CEO chair as she's more likely to anticipate and be able to meet core customers' needs. The market seemed to agree, sending the stock up as much as 14% on the news of her joining the retailer.
It's now or never for J.C. Penney's turnaround. Soltau has a decent chance at delivering a comeback for the department store as retail sales surge in a strong economy. Rival stocks like Macy's, Kohl's, and Nordstrom have all climbed in conjunction with rising comparable sales, so J.C. Penney may be able to catch some of the same tailwinds that have boosted its peers.
It won't be easy, and Soltau will have to make bold moves, but if the company continues on its current trajectory, it may not survive the next recession.
