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J.C. Penney: Will Ellison, the “Number-One Warrior” Win the War?

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When things get tough, thinking out of the box isn’t easy either. But thinking outside the box is what J.C. Penney Co. (JCP) is doing by appointing 49-year-old Marvin Ellison to the position of CEO-designee. Ellison will join JCP on Nov. 1, succeeding the company’s current CEO, Myron “Mike” Ullman, on Aug. 1, 2015.

In an interview earlier this month, Ullman referred to Ellison, who will be the first black CEO in the company’s 112-year history, as Penney’s “number-one warrior.” As the executive vice president of Home Depot, Ellison has been the senior-most operations leader for the retailer’s nearly 2,000 U.S. stores.

J.C. Penney’s tough times began in 2011 when Ron Johnson was hired to breathe life into what had become a tired and uninspired chain. Having been credited with making Target hip and turning the Apple Store into a huge success, Johnson was thought to be the obvious choice. However, his bold plan to shake things up and radically reinvent the brand turned out to be a bit too bold. Customers didn’t like Johnson’s changes, and after 17 months, he left the company, and also a lot of trouble in his wake. In April 2013, Ullman returned in an effort to stop the bleeding.

Since his return, Ullman has been able to shore up the company’s finances by raising billions of dollars and reversing some of Johnson’s initiatives. He closed unprofitable stores, reinstituted many of the brands JCP’s customers knew best and, most importantly, brought back couponing and other price promotions that Johnson had done away with.

But, while sales have started to grow, JCP’s net losses have continued, and the chain is still suffering mightily from a shopper exodus that has made retail history. The extended transition period for the new CEO is in sharp contrast to how Ullman stepped down within three months of Johnson’s appointment. Ellison will not take the helm until nine months after coming on board. Ullman noted, “Marvin and I will be closely aligned on all aspects of running the business because that doesn’t stop while you’re doing an orientation. We’ll have a chance to see a lot of things together, and he’s a quick study.”

The question many in the industry are asking is: will Ellison’s experience as an operations leader give him the tools necessary to repair Penney’s wounded relationship with its customers and spruce up the bottom line?

According to Robin Lewis, CEO and editorial director of The Robin Report, Ellison’s accomplishments during his time at Home Depot suggest that he does have the necessary skills to make some real progress. According to Lewis, “Ellison was respected as a great leader and during his tenure [at Home Depot] succeeded in flipping the 60 percent of associates’ time spent on stocking shelves and taking inventory to 60 percent of their time interacting with customers.” Lewis said this was an “enormous achievement.” He also noted that the experience could help Ellison strengthen the role of Penney’s associates with customers, and bring back many who left during Johnson’s time as CEO.

Stephen Holmes, Home Depot’s director of corporate communications, said, “Marvin is widely regarded inside the company as a key leader in restoring our focus on the customer and our front-line associates”.

Some would argue that hiring Ellison reflects a broader shift in retail in which big companies have sought out detail-oriented operators over executives praised mainly for merchandising aptitude. For example, Brian Cornell, a former PepsiCo Inc. executive who recently became CEO of Target, and Art Peck, incoming CEO of Gap Inc., were pursued based on their ability to run large companies, more than to spot the next hot fashion trend. This may be in large part because of the challenges faced in managing supply chains and keeping customers from passing up on stores in favor of internet shopping.

Regarding this perceived shift, Lewis said, “It would seem that this is the case, but I believe the real shift has yet to come,” adding that the industry’s future executives must have the combined skills of leadership, vision and “tech-savviness” like Steve Jobs and Jeff Bezos.

Mark Cohen, director of retail studies at Columbia and former CEO/Chairman of Sears Canada, Bradlees and Lazarus, believes Ellison’s chance for success is a long shot. The CEO-designee may be “smart and ambitious, but that doesn’t mean he will be successful in a position in which he has no direct experience,” Cohen said. “These cross-discipline moves are often unsuccessful and can be catastrophic. Michael Jordan, arguably the best professional basketball player that ever lived, retired from the game and tried to become a baseball player. He couldn’t hit a single pitch.” He added, “J.C. Penney has to build an entirely new forward view, and their success is not likely when their leadership is completely inexperienced.”

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