Home improve retailer Lowe’s Cos. is poaching J.C. Penney Co. CEO Marvin R. Ellison to be its president and chief executive officer, effective July 2.
Lauren Hirsch of CNBC.com had the news:
Ellison is chairman and CEO of J.C. Penney, which he has attempted to steer through a turnaround. Prior to J.C. Penney, Ellison worked more than 12 years at Lowe’s rival Home Depot, including serving as executive vice president of U.S. stores.
Shares of J.C. Penney closed down 6 percent Tuesday, while shares of Lowe’s were shed 1.9 percent.
“The turnaround program that Ellison put in place at J.C. Penney has partly delivered but is still far from complete. There is now a question mark over how this plan will proceed and, indeed, whether J.C. Penney will remain on the same trajectory,” said Neil Saunders, managing director of GlobalData Retail
“Indeed, exiting before his plan is complete is a tacit admission that he may not be able to deliver what investors are looking for.”
A spokesperson for J.C. Penney told CNBC that it was just informed by Ellison a couple days ago of the move, and it was not aware when it last reported earnings. It currently has four executives filling in to run day-to-day decisions and is looking for both internal and external candidates.
Chris Isidore of CNNMoney.com reported that Lowe’s had been under pressure from an activist investor:
At first it appeared that Ellison had succeeded in turning around JCPenney. It reported a strong holiday season for 2015, a year after he took the top job there and predicted the improved sales would continue. But soon the losses returned.
Ellison will start at Lowe’s on July 2, replacing retiring CEO Richard Niblock. Unlike Niblock, he will not be chairman — the company named director Richard Dreiling to that post.
Lowe’s has been under pressure too. Although it has been profitable its stock has trailed Home Depot’s performance over the last two years. Home Depot’s stock has risen 42% over that period, but Lowe’s shares are up only 9%.
Under pressure from an activist investor, Lowe’s recently named three new members to the board.
Maria Halkias of the Dallas Morning News reported that Ellison believes he leaves JC Penney in better condition:
Ellison made a 3.5-minute video for employees in which he talked about them and the progress the company has made. He said that the Lowe’s job was “a once-in-a-lifetime opportunity” for him to become CEO of a $70 billion-a-year company. He also said that he didn’t seek out the job.
Ellison said he understands if employees are disappointed in him for leaving, but he believes that Penney has improved, modernized and has a strong leadership team.
He said he didn’t deliver on a higher stock price that would have created wealth for employees and shareholders. “That’s the No. 1 job of a CEO,” Ellison said, and he’s stepping aside so the board can find someone “with fresh ideas.”
He’s departing days after Penney reported weaker-than-expected results and as the Plano-based retailer is about to hold its annual meeting Friday.