J.C. Penney Company Inc share price down, appoints new CEO

J.C. Penney Co Inc named on Monday Marvin Ellison as its next CEO after an 18-month search, in an attempt to turn the companys losing course around.

Mr. Ellison, currently CEO of Home Depot Inc, will join the company in November as a board member and later, in August will take over as CEO, succeeding Myron Ullman.
J.C. Penney has struggled in the past, enduring $3 billion in losses in the last three and a half years. With this change the company aims to go to the positive side of the profit balance.

Mr. Ellison is a veteran in the industry with a record of 12 years at Home Depot and 15 year at Target. By taking a more customer friendly approach as CEO, Ellison has managed to almost triple the price of HDs stocks in the past four years.

Most analysts gave Mr. Ellison strong marks. In a note to clients, BMO Capital Markets analyst Wayne Hood wrote: ”Ellison has a successful track record of simplifying store operations, improving customer service, and is widely known for being a great leader and motivator.”

Another positive feedback came from David Schick, an analyst at Stifel Financial Corp. “He deserves a lot of credit, one of the key things where Home Depot had lost their way was the in-store experience. Marvin was critical to bringing it back.” Mr Schick has covered Home Depot since 1999.

However, Michael Binetti, a UBS analyst, changed his rating on the stock from “Neutral” to “Sell” before the announcement. Later he said that Ellison lacks experience dealing with fashion items and other merchandise handled by J.C. Penney.

“They found a good guy who seemed to be well-liked at Home Depot but for me it didnt change what I think are some fairly insurmountable problems for JC Penney over the next few years” Mr Binetii added.

Last week J.C. Penney revealed future plans to generate $2 billion in incremental sales growth over three years, with a focus on its private label brands, online sales and home goods. These measures are taken in order to raise the company above water, after experiencing a heavy drop in sales during the reign of CEO Ron Johnson, 2011 – 2013, and the current CEO Mr. Ullman, who will stay in the company for one year until Ellison assumes the CEO post.

J.C. Penney Company Inc fell 0.42% and closed at $7.09 on Monday in New York, marking a one year change -11.38%. The company is valued at $2.161 billion. According to the Financial Times, the 17 analysts offering 12-month price targets for J.C. Penney Company Inc have a median target of $8.00, with a high estimate of $15.00 and a low estimate of $3.00. The median estimate represents a 12.83% increase from the last price of $7.09