At JCPenney, New Board Members To Shake Things Up


Board meetings are about to get more interesting at JC Penney. The Plano, Tex.-based retailer says it has agreed to appoint activist investor William Ackman and Steven Roth, chairman of Vornado Realty Trust, to its board. It also says it will close five underperforming stores, shut two call centers, and finally lower the curtain on its catalog business.

Ackman, whose Pershing Square is now Penney's largest shareholder, is known for taking large stakes in underperforming retailers -- which have included McDonald's, Target and Borders -- and pressuring them to improve results. In press interviews, he has said that while Penney is a great brand, its performance lags its competitors.

Penney also says it will wrap up its catalog operations, a move that has been in process since 2009. That includes exiting all 19 of its catalog outlets, scheduled for the next two years. It is also streamlining other businesses to increase profitability, including consolidating its furniture outlet business, closing one store in Rancho Cucamonga, Calif., as well as its custom decorating business.



And in addition to the five stores is shuttering, it says it will also close call centers in Grand Rapids, Mich. and Albuquerque, N.M.

"Penney is making progress, and becoming more contemporary," says Sally Mueller, a former marketing executive with Target who now runs Mueller Marketing in Minneapolis. "The move to add Sephora stores was surprising at the time, but has brought more young women into the stores. And the Liz Claiborne line is a good move, for its core customer." Furthermore, she adds that dumping some "dinosaur" businesses, such as catalogs and custom decorating, "will enable it to better focus on digital and social strategies."

But the chain must be careful not to move too quickly. "It's battling not just Kohl's, which has a good read on its customers, but sometimes Macy's as well -- and it can't move too fast without running the risk of alienating its core shopper."

The board appointments reportedly help Penney avoid an ugly public fight -- as happened with Ackman and Target. "We welcome Bill and Steve to the Board," Myron E. (Mike) Ullman, III, chairman/CEO, says in the company's release. "They share our passion for operational excellence and are committed to enhancing value for all of the Company's shareholders. We look forward to benefiting from their expertise."

The company is scheduled to release its fourth-quarter earnings on Feb. 25. In its most recent quarterly results, the company saw sales increase just 0.2%, but reported its third consecutive quarter of positive comparable-store sales results, with comparable-store sales rising 1.9%. (Internet sales increased 3%.) And in December, comparable-store sales rose 3.7%.

Both Ackman and Roth are expected to be elected to the board by Feb. 22, its next board of directors meeting.

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