Skip to main content

JC Penney’s new CEO faces challenges

By WTOP Staff

ANNE D’INNOCENZIO
AP Retail Writer

NEW YORK (AP) — J.C. Penney’s newly tapped CEO has a big challenge ahead of him: The troubled chain is showing signs of improvement after racking up billions in losses, but still hasn’t figured out how to get shoppers back into its department stores.

Penney said Monday that Marvin Ellison, a 30-year retail veteran and executive vice president of stores at Home Depot, will become its CEO next August. Ellison will be the first black CEO in the company’s 112-year history.

Ellison succeeds Mike Ullman, a former Penney CEO who came out of retirement last year to take the helm again. His mission was to stabilize the business following the ouster of Ron Johnson, a former Apple executive who tried unsuccessfully to reinvent the beleaguered chain by getting rid of sales and some basic merchandise. That led to billions in losses of profit and sales.

The company’s profit losses — which have amounted to a total of $3.16 billion in 11 of the last 12 quarters — have slowed significantly under Ullman’s leadership. But the company is still in the red, and analysts say Ellison’s challenge will be to fix the fundamental problems that caused Penney to lose customers in the first place.

They say the retailer doesn’t have merchandise that sets it apart from rivals like Macy’s and H&M. Its stores are drab and unexciting. And its web site doesn’t offer the selection and services that shoppers like.

“While bringing in a credible new CEO has some benefits, J.C. Penney’s customers are leaving the store,” said Michael Binetti, an analyst at UBS in a note to clients Monday.

THE TRANSITION

Penney is looking to Ellison, 49, to help right the ship. Ellison spent 12 years with Home Depot and before that, 15 years at Target. He has expertise in store operations and logistics, but lacks experience in fashion.

Ellison, who also will join Penney’s board, will become president in November, before taking the CEO title next year. At that time, Mike Ullman will become executive chairman of the board, serving for a year.

It’s rare for a management transition to last that long, but Walter Loeb, a New York-based retail consultant, said the time is needed. “I think (Ellison) is an excellent leader … but he needs time to learn the fashion business,” he said.

Ullman said in a statement that he looks forward to working closely with Ellison and the rest of the team in the coming months to ensure a “smooth transition and a successful future for J.C. Penney.”

Penney said Ullman and Ellison weren’t available for interviews on Monday.

WHAT WENT WRONG

Ullman was CEO for seven years before Johnson was brought in to modernize the stores. But customers didn’t like Johnson’s changes, and Johnson left after 17 months. Ullman, who was brought back in April 2013, began restoring sales and basic merchandise that the company ditched under Johnson’s tenure.

Under Ullman, Penney has recorded three straight quarters of increases in sales at established stores. Still, those increases haven’t outweighed last year’s drastic declines.

In the latest fiscal year that ended Feb. 1, Penney recorded a loss of $1.39 billion, while revenue dropped 8.7 percent to $11.86 billion. And last week, Penney warned that its sales at stores open at least a year last month were weaker than expected. It also cut its outlook for sales at established stores for the current quarter.

FIXING THE PROBLEM

The CEO announcement comes after Penney last week unveiled a strategy that it said would boost sales by $2.55 billion over next three years. It entails improving the productivity of its stores’ home department, expanding e-commerce and sprucing up areas like jewelry, shoes and handbags.

Penney sees the opportunity for an additional $1 billion in sales from continued market-share growth. That would bring the chain’s annual revenue to $14.5 billion by fiscal 2017. Still, that’s well below the $17.3 billion it generated before sales went into a freefall under Johnson.

The company also has focused on cutting costs. Earlier this year, it cut 2,000 jobs and shuttered 33 stores. But the company didn’t announce any more store closures last week as analysts had expected.

On news of the CEO appointment, J.C. Penney’s shares closed up 3 cents, or less than a percent, to $7.09, on Monday. That’s after having risen more than 3 percent earlier in the day.

J.C. Penney shares have lost more than 80 percent of their value since early 2012 when investor enthusiasm was high over Johnson’s turnaround strategy.

_____

Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote