Penney's CFO Says He And CEO Have No Plans To Quit
PLANO (AP) - The word from J.C. Penney's Chief Financial Officer Ken Hannah: neither he nor CEO Ron Johnson have plans to resign despite a growing chorus of critics calling for a management shake-up as they lose faith in a turnaround strategy.
Hannah's comments come as the Plano, Texas-based department store reported dismal fourth-quarter results late last month that capped a year of snowballing losses and sales drops. For the year, Penney amassed almost a billion dollars in losses and saw its revenue plunge nearly 25 percent.
Penney shares remained unchanged at $15.65 Wednesday. The stock has lost more than 60 percent of its value since early February 2012 when it rallied on investor enthusiasm for Johnson's vision.
In the latest blow to Penney's turnaround plan, Vornado Realty Trust, one of Penney's biggest shareholders, sold more than 40 percent of its stake in the company last week. The company's chairman and CEO, Steve Roth, sits on Penney's board.
"I can tell you that I am not resigning. Ron is not resigning," Hannah said during the Bank of America Merrill Lynch consumer and retail conference. "We had a tough year last year, and I want to make sure that you all understand Ron and I are not going to go hide."
Under Johnson, who came on board in November 2011, Penney began ditching coupons and most of its sales events in favor of everyday low prices, bringing in hipper designer brands such as Betsy Johnson and installing shops to replace racks of clothing. Johnson's goal is to reinvent Penney's stores into a hip place to shop in a bid to attract younger, wealthier shoppers. But in the year since Johnson rolled out his plan, once loyal customers, looking for big sales signs, have strayed from the 1,100-store chain.
During his address, Hannah emphasized that Penney needed to bring back its loyal customers while reaching out to new ones. Penney is now restocking some of the products it eliminated like khakis and basic jeans under its private label brand called St. John's Bay. The company, which scaled back hundreds of sales events early last year, is now offering sales every week. It's also bringing back coupons.
From Wednesday through this Sunday, shoppers can get $10 off their purchase of $50 or more.
"We hear our customers loud and clear," Hannah said. "And we've got to do this in a way that allows us to attract that core customer that lost confidence in us and then continue to grow with new customers."
When an analyst asked about Vornado's stock sale, Hannah answered that Roth "didn't give any of us indication that he was going to do anything with his shares" following a recent board meeting.
Hannah said Vornado's move came as its CEO Michael Fascitelli was departing and Roth was assuming the day-to-day responsibilities of the real estate investment trust. "My guess is, with him taking over the CEO responsibility, he didn't want the distraction," Hannah said.
Hannah noted that the 10 shops that have been installed at most of Penney's stores starting late last year have been performing better than the rest of the store. Joe Fresh shops are slated to open in about 680 Penney stores on Friday. Later this spring, Penney will be opening shops for its new home area that will feature merchandise from Jonathan Adler and Michael Graves, among other home designers.
Right now, shipments of products designed by Martha Stewart Living Omnimedia that are supposed to be heading to stores are in limbo. Penney is fighting in New York State Supreme Court with Macy's over whether its rival has exclusive rights to certain products like bedding, cookware and bath items.
Macy's sued Martha Stewart Living Omnimedia over the alleged breach of their long-standing contract when Penney signed a deal in late 2011 with the home brand to open shops this spring at Penney stores. Macy's also sued Penney. The judge has pushed the three companies into mediation after nearly three-week trial.
"We certainly would love to be able to have all of Martha's products in our stores as soon as possible," Hannah said. "But at this point, we are going to assume that that's not going to be the case, and we had been bringing in additional brands in those categories."
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