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JCP shares up on CNBC report of new CEO search

SHARE JCP shares up on CNBC report of new CEO search
Customers are seen in the main entrance of a new J.C. Penney store in the Manhattan Mall in New York in 2009.

Customers are seen in the main entrance of a new J.C. Penney store in the Manhattan Mall in New York in 2009.

Associated Press

NEW YORK — Shares of J.C. Penney shares jumped about 7 percent on Thursday on a media report that the retailer is starting a new CEO search to replace Mike Ullman.

Ullman, who had been J.C. Penney's CEO from 2004 to 2011, took back the reins in April after Penney CEO Ron Johnson was ousted after 17 months on the job after his radical makeover of the chain failed to boost results. Analysts had expected Ullman's reign the second time around would be transitional until Penney hired a replacement.

CNBC reported that the company is seeking a new CEO and that activist investor Bill Ackman sent a letter to J.C. Penney's board saying the process should be accelerated. Former J.C. Penney CEO Allen Questrom, who ran the company from 2000 to 2004, said in an on-air interview on CNBC he would consider coming aboard as chairman under the right circumstances, if he agreed on the choice of CEO and as long as the board wasn't hostile.

Jennifer Burner, a spokeswoman at Ackman's Pershing Square, confirmed that the media report about the letter was accurate and that Questrom would be willing to return as chairman if he approves of the new CEO. She declined to make the letter available.

Questrom and representatives for J.C. Penney could not immediately be reached for comment.

Shares of Penney jumped 91 cents, or 7.1 percent, to $13.71 during afternoon trading. They are still close to the low end of the stock's 52-week range of $12.50 to $32.55.

Penney is trying to win back customers who fled during a transformation plan spearheaded by Johnson that backfired and led to massive losses and sales declines.

Penney amassed nearly a billion dollars in losses and its revenue dropped 25 percent for the fiscal year that ended Feb. 2 in the first year of the failed transformation strategy, which included decluttering stores, revamping merchandise and doing away with most discounts. Losses and sales drops continued into the first quarter, as the shadow of Johnson's legacy remained.

Ullman has been working to stabilize the business by bringing back basic merchandise and more frequent sales that were eliminated by Johnson in a bid to attract younger, hipper customers. But some analysts believe that while traffic is improving as a result of stepped-up discounts and the return of brands like St. John's Bay, there has been no evidence of a turnaround yet as the company heads into the bulk of the critical back-to-school shopping period. Moreover, concerns are growing about Penney's financial liquidity.

Deborah Weinswig of Citi Investment Research, published a note Tuesday saying that Penney has ample liquidity for this year but 2014 is still in question and Penney could "face a cash crunch in 2015." Weinswig, once an advocate for the company, lowered the Penney's rating to "sell" from "neutral' last week.

Dan Hess, CEO of Merchant Forecast, an independent research firm that monitors the retail sector, said he would be surprised if the board hired Questrom as chairman. But he added that he wouldn't be surprised if Questrom accepted the job.

Hess described the relationship between Ackman and Questrom as "rocky." Questrom had publicly criticized Ackman and Johnson for pushing the changes, which included everyday low pricing and trendy merchandise. The changes sent sales spiraling lower and hurt morale among its employees.

Hess said that Ullman has done a good job in stabilizing sales even though the improvement on the selling floor isn't reflected in the share price.

"A lot of things are working, but it takes time," he said. He couldn't guess the names of candidates for the CEO job Penney is considering.

Penney is expected to issue its second-quarter report Aug. 20.