• by Sarah Mahoney , August 9, 2013

For those just catching up with the management meltdown at JCPenney, it might help to invoke a few comic-book sound effects. Just four months after the ouster of CEO Ron Johnston, investor Bill Ackman (Penney’s largest shareholder, owning about 18%) is calling for the swift removal of Myron E. (Mike) Ullman, III, releasing open letters to the media. (Pow!) Company Chairman Thomas Engibous fired back with his own letter, insisting Ullman is the right man for the Penney turnaround, pointing out that it was Ackman who campaigned to hire Johnson in the first place (Bam!) and that Ackman’s actions are “disruptive and counterproductive.” (Ooof!)

Ackman responded with another missive, calling for Engibous’ head as well, asking for a board meeting to vote on a new chairman as soon as possible. (Zamm!) "I have lost confidence in our chairman's ability to oversee this board," Ackman says in the open letter, calling Penney’s situation “critical.” While he was at it, he slammed Engibous for allowing Ullman to make key hires, including the recent appointment of former Kraft Foods marketing exec Debra Berman as CMO earlier this week. "The decision to hire a consumer packaged goods marketing executive as the CMO of JC Penney is strange," Ackman writes. "The skills and experience one learns from marketing lunch meats and American cheese are not logically applicable to marketing JC Penney to our customer base."

The stakes are especially high for Ackman, who reportedly has lost $600 million on his stake in the battered retailer, with Penney very near reporting its next quarterly results, scheduled for Aug. 20. Many observers expect it to report steep sales declines, indicating that Ullman has been able to do little to stop the bleeding Johnson started.

While Engibous is digging in, Wall Street observers would be thrilled to see Ullman leave, especially if he is replaced (as Ackman has suggested) by Allen Questrom, CEO of JCPenney from 2000 to 2004. 

“It would be the best thing to happen to JC Penney in a decade,” writes analyst Charles Grom of Sterne Agee, in his notes on the power struggle. “If this were to materialize, we believe it could lead to the return of many former JC Penney executives,  across the C-Suite. In our view, a return of the Old School JCP team, under Questrom, would be a very powerful combination and materially improve its turnaround situation.”

Despite its declining sales, investor misery and management hijinks, though, there’s still plenty of evidence that the JCPenney brand has credibility with shoppers. Among moms, Penney has been trending upward in the YouGov BrandIndex chart since the beginning of August in two key measures: buzz and purchase consideration. “The buzz uptick is much stronger than the purchase consideration, which means that its marketing and advertising are definitely starting to take hold with moms,” a spokesperson for the index explains to Marketing Daily.

Penney’s problems come at a particularly bad time -- the midst of the back-to-school season, and heading into the holiday period. Any management changes will likely take months to be observed at the level of the average American shopping mall.

Meanwhile, back-to-schools are looking solid -- if not stellar, Bill Martin, founder and EVP of ShopperTrak, tells Marketing Daily. “Our projection was a 4.2% increase in sales and a marginal lift in traffic,” he says. “So far, the data suggests we are on track for that. In the most recent week, ended Aug. 3, week-over-week sales were up 5.6%.”

He says that in general, mall traffic has risen 1.7% in the year, spread equally among regions. “That’s a strong indication that consumers still prefer shopping in brick-and-mortar stores.”