The latest in a slew of executive exits, Marvin Ellison has announced he will leave JCPenney (NYSE: JCP) to helm the home-improvement retailer Lowe's (NYSE: LOW). In light of this news, JCPenney's stock price dropped by as much as 8% on Tuesday morning.
Analysts claim Ellison's abrupt departure could be an indicator of his lack of confidence in JCPenney and department stores generally as he jumps ship to an area of retail that has been deemed more Amazon-proof (NASDAQ: AMZN).
"Marvin Ellison's departure is not connected to recent company performance or the JCPenney business," said a spokesperson. "JCPenney is a relevant brand with a strong American heritage, and we continue to believe there is tremendous opportunity ahead for the company. As such, we expect to attract a new CEO who believes in the Company's enormous potential and future place in retail."
Ellison, who became the CEO of JCPenney in 2015 after being with Home Depot (NYSE: HD) for 12 years, was responsible for bringing the department store back from the brink of disaster. His immediate predecessor, Ron Johnson, tried to make the store more upmarket but alienated core customers in the process, leading to a $1.42 billion operating loss in 2013 and nearly $5 billion of debt.
In order to salvage JC's reputation, a new leader is needed and quickly. This leader needs to be capable of and concerned enough to understand customers and employees. What's more is that the company needs to give customers a reason to visit the store. As Toys-R-Us liquidates and Sears (NASDAQ: SHLD) continues to close stores, there is an opportunity to give customers an alternative that is not merely available, but better.
"This is arguably the most challenging and competitive retail market that we've seen in over 50 years," Ellison said in a call with investors less than a week ago.
He added: "Retail in the US is a multitrillion-dollar industry, and we believe there could be multiple winners. Those retailers who can offer their customers a value while providing the best in-store and online experience will be winners. And as a company, JCPenney plans to be one of those winners."
On Tuesday, Jim Cramer called JCPenney "very problematic" and said it possibly had "the worst" quarterly numbers other than Sears. The company reported sales Thursday that missed analysts' expectations and cut its full-year earnings outlook.
Without Ellison at the helm, JCPenney could find itself in a much weaker position, at least in the short term. A team of four executives will run the company as it searches for a new CEO.