5 Dumbest Things on Wall Street This Week: April 12
Au Revoir Ron
Alas Dumbest fans, we knew the time would come when our dear Ron would move on. We just didn't think he would come and go so quickly. He arrived on the scene so erect with energy that now our world seems flaccid without him.
So with a heavy heart, we bid farewell to our friend Ron. He came. He saw. He screwed everything in sight. And for this we say amen.Wait a second...Come on! We're talking about J.C. Penney (JCP) CEO Ron Johnson, not porn star Ron Jeremy. Get your minds out of the gutter people! In case you missed it, Penney's board fired Johnson late Monday, only 17 months after it brought on the former Apple (AAPL) and Target (TGT) executive to sex up the staid retailer. Shares of Penney sank more than 58% in the past year as Johnson implemented a turnaround plan based on upscale products and every-day low prices as opposed to the company's traditional strategy of seasonal sales and coupon blasts. In his place, the board brought back Johnson's predecessor Mike Ullman, the man who Bill Ackman, a board member and Johnson's original sponsor, said "chronically mismanaged" the retailer prior to Ron's arrival. Why bring back Ullman specifically to right Ron's wrongs? Other than to give Penney's longer-serving board members a chance to stick it to the categorically overconfident Ackman that is. Well, perhaps it's because Penney's board is worried about the company's dwindling cash position and they believe Ullman, who ran the retailer from 2004 to 2011, still has some residual credit with increasingly nervous vendors. Penney ended the last fiscal year with less than $1 billion in cash, and Standard & Poor's reaffirmed its financial risk profile as 'highly leveraged' despite the CEO switch. Or maybe the board simply needed a placeholder in the corner office while it scouts for a new CEO, and Ullman was kind enough to oblige for the bargain price of $1 million a year, a sum well below the $17 million Johnson reportedly pocketed for his Plano, Texas sojourn. As to who would sign up for what very well may be a suicide mission, well, that's another question we can't fully answer. Still, should J.C. Penney take a turn for the worse, better the undertaker be a sympathetic figure like Ullman than another mercenary in the Johnson mold. One final theory is that the board is reinstalling Ullman in a last ditch effort to reconnect with Penney's customers. Not that Ullman had much success increasing sales during his previous tenure atop the once-iconic retailer. Not in the least. But at least Ullman, like Allen Questrom before him, knew his customers' wants and needs. He respected who they were and how they liked to shop, even if that meant coupons and markdowns. Johnson, on the other hand, never appreciated his shoppers' loyalty, taste or opinions. (Or those of his employees for that matter.) His redesigned stores were monuments to his manhood, not functions of their needs. The upscale designers on his shelves were his fantasy partners, not theirs. Put simply, in Ron's warped view, the customer's role in the affair was to submit to his will and squeal with choreographed delight at his every move. And once it became overwhelmingly clear he could no longer deliver the thrills he promised, he was forced to beat it. Once again, we're talking about the former Penney's CEO. Not the porn star. Although in either case the whole sordid affair makes us want to wash our hands in disgust.
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