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Upscaling Penney? New chief says no

Myron E. Ullman III
Myron E. Ullman III

PLANO, Texas — Shares of J.C. Penney Co. fell on news of a new chief executive with a background in luxury stores, but the incoming CEO said Thursday he would not try to make Penney more upscale.

Myron E. Ullman III will become Penney's chairman and CEO on Dec. 1, replacing Allen Questrom, who will retire nearly a year ahead of schedule.

Ullman, 57, a former CEO of Macy's and senior executive at luxury retailers LVMH Moet Hennessy Louis Vuitton and DFS Group, said he wants Penney to offer fashionable goods at modest prices.

"It would be an exaggeration to say we would take Penney's upscale," he told investors on a conference call Thursday. Ullman, however, has said even mid-level chains can learn a thing about marketing and image from luxury stores.

Penney did not disclose details of Ullman's compensation. Ullman said he signed up for "five-plus years" and that details of his contract would be filed soon with the Securities and Exchange Commission.

Plano-based Penney announced Wednesday that Ullman would replace Questrom, 64, who had led the company since September 2000, overseeing an improvement in sales and the company's stock price.

On Thursday, shares of Penney fell $2.03, or 5.4 percent, to close at $35.33 on the New York Stock Exchange.

Questrom had indicated he would not stay beyond his current 5-year contract, which expires in September 2005, but said he was leaving early to make room for Ullman.

The two men competed against each other in the mid-1990s, when Ullman was named CEO of bankrupt Macy's and Questrom ran Federated Department Stores. Federated bought Macy's in 1994.

Ullman said he wanted to study Penney's operations until mid-spring before putting his imprint on the company.

Ullman indicated that he would not alter Penney's strategy of building new stores away from shopping malls. Current company officials say the chain may open 100 or more off-mall stores in the next several years.

"In the mall, it's often which store has fewest parking problems" that gets customers, Ullman said. "We want to make sure Penney is a destination."

Penney is in the fourth year of Questrom's turnaround campaign. Sales at stores open at least a year are up 6.8 percent over a year ago, and the company's stock recently hit a 5-year high.

Candace Corlett, a principal at retail consulting firm WSL Strategic Retail, said the new CEO must keep up the energy level that Questrom brought to Penney while steering between rivals that range from discounters to high-end specialty shops.

"That's a formidable task," Corlett said. "They don't have the reputation for the lowest price, and they don't have the reputation for innovative products, so why choose Penney?"

While Sears, Roebuck and Co. has struggled, Penney has lifted sales by offering a good mix of private-label and national clothing labels and by introducing exclusive lines with prominent designers, Corlett said.

Analysts have given much of the credit inside Penney stores to Vanessa Castagna, the company's CEO of department stores. Castagna was Questrom's choice for CEO but was passed over for the top job for the second time since leaving Wal-Mart Stores Inc. for Penney in 1999.

"I don't know what Vanessa's plans will be," Questrom said. "I am disappointed in Vanessa not getting the job."

Castagna was not available for comment, a Penney spokesman said.