Stocks slump after JC Penney CEO Ellison jumps ship to Lowe's

Angelo Anderson
May 23, 2018

Lowe's rose 2.7 percent after announcing that it was hiring the CEO of J.C. Penney, Marvin Ellison, to lead the company.

Ellison came to Penney in 2014 with a strong reputation honed through 12 years at Lowe's biggest competitor, Home Depot Inc, and shares in Lowe's gained as much as 3 percent on the news of his appointment before retreating.

In late morning trading, Lowe's shares were down less than 1 percent to $86.71, while J.C. Penney shares had fallen 6 percent to $2.35.

The sudden departure of Ellison is the second straight time Penney's has had to deal with unexpected C-Suite turmoil.

The last earnings report was especially dour. J.C. Penney, which has struggled to compete within the quickly changing retail landscape, told CNBC that it was informed by Ellison a couple days ago of the move. With fiscal year 2017 sales of $68.6 billion, Lowe's and its related businesses operate or service more than 2,390 home improvement and hardware stores and employ over 310,000 people. Wall Street was not convinced by the excuse, all the more since rivals Macy's (m) and Kohl's (kss) reported far better results for the period.

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What are the challenges facing Penney? The company recently cut its profit forecast, blaming cool weather for weighing down sales. "There is now a question mark over how this plan will proceed and, indeed, whether J.C. Penney will remain on the same trajectory", Saunders said. "Indeed, exiting before his plan is complete is a tacit admission that he may not be able to deliver what investors are looking for".

The home improvement retailer called Ellison a 30-year retail industry veteran who brings "significant leadership and operational expertise to Lowe's".

Four members of the company will be serving in the Office of the CEO.

In its statement Monday, Lowe's also named Rick Dreiling, a Lowe's director since 2012, as its new board chairman, effective July 2. The team will collectively lead the retailer until a new CEO is named.

Other reports by Iphone Fresh

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