JCPenney Bets on Apple's Retail Genius -- and It's Already Paying Off
The Apple exec JCPenney lured away to be its new CEO won't assume his role until Nov. 1, but he's already affecting perceptions of the company -- at least on Wall Street .
JCPenney's stock price rose the most since 2000 after it announced Ron Johnson, who spearheaded the creation of Apple's retail empire, will take over as chief executive officer of the department-store chain, the country's third-largest.
Mr. Johnson will replace Myron Ullman Nov. 1, the Plano, Texas-based company said in a statement today. He had spent more than a decade at Apple, working with co-founder and CEO Steve Jobs to build the stores where customers now line up overnight for products such as the iPhone and the iPad.
Mr. Johnson will oversee a much larger retail footprint at JCPenney, albeit one that has been struggling. The retailer, which operates more than 1,100 stores, this year closed its catalog business and shuttered some locations, following talks with shareholder William Ackman on how to improve results. It's also struggling with the rising costs of materials, such as cotton.
"It's a credit to the company that they were able to recruit an executive of Ron's capabilities," Mr. Ackman, the retailer's largest shareholder, said. His Pershing Square Capital Management LP disclosed a 16.5% stake last year in JCPenney, making him the largest investor.
JCPenney rose $5.26, or 17%, to $35.37 at 4 p.m. in New York Stock Exchange composite trading, the biggest percentage gain since Oct. 13, 2000. It had the effect of adding more than $1.2 billion to the retailer's market value. Apple climbed $5.84 to $332.44 on the Nasdaq Stock Market.
Mr. Johnson, a former Target Corp. executive, was hired by Mr. Jobs to help build the company's retail operation in 2000. From the first stores opened in 2001 in California and Virginia, Mr. Johnson expanded the business to more than 300 locations, generating revenue of $3.19 billion in the quarter ended in March, up about 90% from a year earlier.
"While it's very difficult to leave Apple, perhaps the greatest company in the world, I just wanted a chance to lead a company in an industry that 's kind of tied to my roots in retailing," Mr. Johnson said.
Mr. Johnson will receive a base salary of $1.5 million and get an annual target bonus equal to 125% of his pay, according to a regulatory filing. He will receive a grant of 1.66 million restricted shares valued at $50 million based on JCPenney's closing stock price on June 13. In addition, Mr. Johnson purchased warrants to buy $50 million worth of JCPenney stock.
"We've got a great retail team in place and are actively recruiting for his replacement," said Amy Bessette, a spokeswoman for Apple. Mr. Johnson is the second senior executive to leave Cupertino, Calif.-based Apple in the past few months. In March, Bertrand Serlet, the senior VP for Mac software, left the company to focus on scientific research.
Mr. Ullman, 64, will become executive chairman of the department-store chain, where he boosted sales 1.2% to $17.76 billion in 2010, reversing three straight years of declines. Brands by Liz Claiborne, Aldo and Mango helped lift sales at stores open at least a year by 3.8% last quarter. Net income in the period ended April 30 increased 6.7% to $64 million.
JCPenney has sales per square foot of $153 last year, while Apple generated $4,355, according to Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co. in New York.
-- Bloomberg News --