J.C. Penney is searching for a new CEO

Discussion
Jill Soltau, Former CEO, J.C. Penney - Photo: J.C. Penney
Jan 04, 2021
Tom Ryan

J.C. Penney’s CEO Jill Soltau has exited a month after the retailer emerged from bankruptcy proceedings through a sale to Simon Property Group and Brookfield Asset Management.

Ms. Soltau departed Dec. 31 and was succeeded by Stanley Shashoua, the chief investment officer of Simon. The new owners have launched an executive search with the assistance of strategic partner Authentic Brands Group. Management has not offered a reason for the exit.

In a statement, Penney said the move “charts a fresh course” for the department store chain, which hasn’t recorded an annual profit since 2010. “The search will seek to identify a leader that is focused on modern retail, the consumer experience, and the goal of creating a sustainable and enduring JCPenney,” according to the company.

Penney had been showing improvement toward the end of 2019, but a looming debt restructuring and the pandemic forced the chain into bankruptcy in May.

The department store chain’s efforts overall to regain momentum have been undermined by weakness in the apparel category as well as challenges connecting with younger consumers. Since joining Penney in October 2018, Ms. Soltau had focused on reducing clutter to make the core women’s department easier to shop, centering merchandise around lifestyle and emphasizing activewear, special sizes and denim, as well as online.

The Wall Street Journal had described Ms. Soltau’s strategy as a “back to basics” approach. The new owners may be looking for even simpler tactics.

David Simon, CEO of Simon, said on an earnings call in November, “We get out of bad stores. We buy the inventory at a discount. We right-size the overhead. And we operate with better business judgment, and lo and behold, you suddenly have a business that’s got significant positive EBITDA and you haven’t paid much for it.”

Correction: No executives other than Jill Soltau have left J.C. Penney at this time since the retailer emerged from bankruptcy on December 7. Due to confusion over separate holding companies established as part of the emergence, a previous version of this article indicated that virtually all of Penney’s executives had departed.

DISCUSSION QUESTIONS: What do you view as the positives and negatives that Jill Soltau brought to J.C. Penney? What qualities should Penney’s owners look for in a new CEO?

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21 Comments on "J.C. Penney is searching for a new CEO"


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Mark Ryski
BrainTrust

I respect Jill Soltau and her career in retailing, however her tenure at J.C. Penney was troubled from the start. She spent an inordinate amount of time building her new leadership team, and the moves she made were tentative and marginal, for example, her early decision to close only a handful of stores when much more was needed. In all fairness to Ms. Soltau, J.C. Penney was already a troubled business when she took it over. The new ownership team needs to find a courageous leader who is willing to completely disrupt the current model and transform the chain into something new and special – this will not be easy to find.

Kai Clarke
BrainTrust

It is not the CEO’s fault that they’re having to try to revive a dead-model retailer. It requires a complete shift in focus and goals, and a restructuring of systems and processes. To do this properly an independent CEO who is properly budgeted and empowered will need to be hired.

storewanderer
Guest
3 months 5 days ago

This talk of “reviving” JCP seems to be a waste of time and effort. Someone has been trying to “revive” JCP for a long time. The last person that made any serious changes that may have actually revived the thing, that Ron guy from Apple, the changes were shortly after “un-done” by old management who got brought back in … unreal. Now, with Simon/Brookfield, they control the real estate. At this point, eliminate the failed retailing concept known as JCP and put in a concept that will draw customers and be positioned to grow in the future.

Richard Hernandez
BrainTrust

We recently discussed this topic here and, at that time, we appreciated the effort and changes that were being made, but we also said it depended on the time she was allowed to test and implement that would make the difference. Unfortunately, it seems like time ran out for a seasoned retail veteran to make the turnaround. I hope the new leadership teams finds that person who can develop the brand into something unique to stand out from all the other mid-tier retailers in the market.

Neil Saunders
BrainTrust

Jill Soltau was not the author of J.C. Penney’s problems and, in some ways, her customer-centric approach was the right one. However the turnaround was slow and broadly unconvincing. As such, it is not surprising that the new owners decided to make a change at the top. That said, changing the jockey does not suddenly make the horse a thoroughbred. J.C. Penney remains a weak brand operating in a weak segment of the market. Tweaks can be made to make the business more stable and more profitable, but it is going to take a lot of work and skill to give the company long-term vitality.

Brandon Rael
BrainTrust

Any business transformation requires a significant amount of disruption and, most importantly, change to turn around what has become a legacy retail business model. To turn around, J.C. Penney will require a structure that will provide the CEO the authority and control to drive a transformation with their team, without controls and restrictions.

While Jill Soltau has had an accomplished retail career, any CEO would be challenged with the task of turning around J.C. Penney, whose operating model does not resonate with today’s consumer. The fundamental challenge of J.C. Penney starts with their brand messaging and what the company represents in 2021. Along with that comes the painful part of transforming legacy business processes, upgrading their technology, and improving their in-store and digital experiences.

For any CEO to succeed with J.C. Penney, it will require a courageous leader and someone truly empowered to lift the company before it’s too late.

Jeff Sward
BrainTrust

I suspect that there are many layers to the agenda that Simon/Brookfield have in their acquisition of a deeply discounted J.C. Penney. I’m sure that part of it is indeed the revival of the middle market department store. Or is reinvention a better word? Is it about the J.C. Penney brand or is it about the best use of all that real estate 10 to 20 years out? And is the best use of all that space really a mid-tier department store? It won’t surprise me to see a non-retailer appointed as CEO. They will hire a merchant/ops team to rebuild some version of J.C. Penney while the real CEO agenda will be to orchestrate a new business model for how to best utilize all of the assets of the opco and propco divisions.

Dick Seesel
BrainTrust

As I’ve mentioned before, Jill Soltau is a former colleague of mine from her Kohl’s days. I respected her efforts to put the J.C. Penney spotlight back on the merchandising of its core businesses (apparel and soft home) after some of her predecessor’s missteps with appliances and the like. She and her team probably did not move fast enough to roll out the innovations tested in the Hurst, TX location — or lacked the financial resources for it — and the impact of COVID-19 threw another monkey wrench into the works.

But cutting loose the entire leadership team — not just the CEO — is a risky move by the new owners. There is nobody at J.C. Penney with any institutional knowledge, and good luck to executive recruiters trying to fill so many key positions, from CEO to CFO to lead merchant. (The sixth CEO in a decade, by the way.) Salvaging J.C. Penney in order to keep a key tenant in business may turn out to be a Pyrrhic victory.

PeterEvans
Guest
3 months 2 days ago

Risky or not, it is 10 years too late. Mall retail is dead as a doornail post COVID-19/Amazon. The next wave is homeowners purchasing 80 percent of goods via mail delivery, and the malls are soon to complete their collapse simultaneously with the small retailer’s demise in all but a very few categories. As for hiring a successful seventh CEO — not going to happen, the board only looks to the inner circle, all of which are ill-equipped to understand modern consumers or retail directions. As no outsiders have been/will be permitted to penetrate the “gentleman’s club” there is zero possibility of a turnaround. It is certainly not going to come from people with long-term “experience” — they have been out of touch with retail for over 20 years (with the exception of Walmart).

Gene Detroyer
BrainTrust

Ms. Soltau was hired to be the captain of the Titanic after it hit the iceberg. She had no chance. We can criticize her for taking action or not taking action. But whatever she could do had no chance of correcting the trajectory of this ship.

J.C. Penney is now a financial play. Let’s stop talking about turning it around and find a CEO who can execute a plan to maximize the financial returns of the owners before we finally and belatedly bury it.

Bob Phibbs
BrainTrust

While I found her to have had a lack of innovation toward the customer (a single new prototype delivered as they went into bankruptcy) the complete departure of her new team leaves the brand crippled far more than her sudden departure. The word “modern” in their job notice stands out. I thought the team credentials were from other successful brands like Target. While they purchased the brand for pennies on the thousands of dollars, you can only pull a carrot up out of the ground so many times.

Cynthia Holcomb
BrainTrust
No annual profit since 2010! The obvious question is “why should J.C. Penney continue to exist?” Doing a post mortem on Ms. Soltau’s leadership, while totally ignoring a decade of ongoing restructuring failures, is a pointless exercise. Seeking a new CEO? A CEO hired to implement a garage sale mindset and budget to “suddenly have a business that’s got significant positive EBITDA and you haven’t paid much for it,” as explained by David Simon, CEO of Simon? Really, truly? This is the plan for the next restructuring of J.C. Penney? Why waste energy hiring another CEO? This person will not succeed. How could they? J.C. Penney’s plan to buy inventory at a discount as a means to save themselves is a last-ditch Hail Mary to save the ship from sinking in debt. J.C. Penney is no longer in the retail business. Retailers inspire their customers with products carefully curated to reflect the retailer’s brand. Especially important in women’s apparel, product curation, the impetus of an emotional reaction resulting in the excitement of purchasing a product… Read more »
Gary Sankary
BrainTrust
Ms. Soltau had her work cut out for her, trying to drive change in an organization that historically has been resistant to it. J.C. Penney’s value proposition is not resonating, their customer base has so significantly eroded that nothing short of a spectacular change to their business model will turn them around. The question on my mind is, does the company have the courage and resources to effect the kind of change they need to fundamentally change their business, from the product assortment to the customer engagement strategies? The new ownership has a slightly different motivation for keep the company solvent, I believe they’re looking at this from a real estate perspective – shore up the anchors in their shopping centers to support revitalizing those properties. The fact that this is a bit more expansive in scope gives me a slight glimmer of hope that they will be able to drive much needed change aggressively. The open question is, will they be able to refocus on the right value proposition and will they be able… Read more »
Ricardo Belmar
BrainTrust
Whether you agree or disagree with Jill Soltau’s approach to reviving J.C. Penney, she was a retailer at heart and her leaving, along with essentially her entire team, tells us the new management isn’t extremely interested in having a retailer at the helm. Just look at who they have named as interim CEO during the search for a “leader that is focused on modern retail.” What we see publicly demonstrates a desire for a financial leader that will extract the best value out of existing J.C. Penney assets rather than someone who understands “modern retail” and would try to save the sinking ship. My suggestion, although certainly not a popular one even if suggested by others before me, would be to find another Ron Johnson to completely remake the brand. Frankly, give Ron another shot – the risk of losing customers is minimal at this point considering where the brand stands with consumers! The new CEO would need to take risks, look for interesting retail partners to bring into the store – not just use… Read more »
Peter Charness
BrainTrust

You think Eddie Lampert needs a new gig? Helming a mid-market, primarily brick-and-mortar department store through COVID-19 is a monumental effort with long, long odds. Maybe, just maybe someone can keep J.C. Penney rolling long enough for the new owners to keep the malls going and get some financial return. Those are also long odds.

storewanderer
Guest
3 months 5 days ago

Wait, there are still about 31 Kmart and about 65 Sears Stores open, plus they are collecting royalties from Craftsman sales at other retailers. Sears had a far stronger foundation than JCP and there are unique reasons why Sears has continued its very half-hearted operations of retail stores this long. I don’t think JCP has those same factors to buy it more time.

Ryan Mathews
BrainTrust

I’ll forgo comments on Ms. Soltau other than to say she did the best she could in a ridiculously bad situation. PE companies are fixated on positive EBITDA, generally to the exclusion of long term sustainability, consumer-centric management, and/or actual reposition. It’s a great way for a few folks to make a great deal of money, but it’s a lousy formula for rebuilding a brand. The fact is J.C. Penney has outlived its time and is dependent on malls, another format with a limited shelf life – at least as they currently operate. Could the chain reinvent itself? Of course, but not without significant investment, which tends to be the enemy of positive EBITDA. The next CEO will face the same problems Ms. Soltau did, just in a more advanced state of decay.

Steve Dennis
BrainTrust

The J.C. Penney model has been broken for nearly 20 years and nothing of any consequence has been done to grow share of wallet with its core customers and to win new customers at the rate they need to in order to make the business viable over the long term. It’s a mistake–and has been a mistake–to believe JCP has a cost problem, or a too-many-stores problem. It has a relevance problem, which mass store closings and cutting into muscle will not fix. Bailing doesn’t fix the hole. The new owners do have the benefit of a low cost basis and the ability to exert more strategic control. But if they think they can cost cut and store close their way to prosperity, they have learned nothing from the lessons of the past two decades of retail.

Craig Sundstrom
Guest

One month? I think that speaks for itself — not long enough to do either much good or (more) harm. The qualities to look for are Biblical in nature…think Lazarus (no, not the former department store of that name).

storewanderer
Guest
3 months 5 days ago
The retail market has changed a lot since even this past summer when the mall owners committed to purchasing JCP. I never saw any positives from this new JCP CEO in the stores. She is clearly well experienced and talked a good talk, but I never saw it translate into anything positive in the store. I really think JCP is so tainted that one person cannot save it even if they are knowledgeable and experienced. JCP needs to just be put away for good, and take the spaces, remodel them so extensively they no longer look, feel, or smell like JCP, and start over. I am guessing JCP’s holiday results were an absolute disaster. With shorter store hours than the rest of the mall ( and closing 2-3 hours earlier than Macy’s who had extended hours beyond the rest of the mall), lousy merchandising, low inventory levels in areas that had surprising demand like basic casual men’s clothing, and a 25% off all purchases coupon being run a few days before Christmas, what could possibly… Read more »
PeterEvans
Guest
3 months 2 days ago
I worked 27 retail store jobs over 10 years in several different markets, graduated in the top 5% of my class, double majoring in Operations and Marketing. Predicted the triple revenues Walmart would generate 10 years in advance and predicted the total collapse of JCP the day the CEO from 10 years ago announced his, “We will become like Macy’s plan” at which time I also applied to be CEO. Never heard a word. So I then started a small business retail development business successfully transferring between $62m and $84m in sales revenues to small business owners directly taken from sales that used to go to big-box stores. Is anyone ever surprised that the cronyistic hiring these retailers engage in would result in performance levels anyone with a high school degree would achieve? The boards of directors don’t have a day of university training and are in charge of retail to consumers? Laughable. Good bye to JCP as predicted, good bye to the mall owners that bought them — they are next, and you can… Read more »
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