Plano, TX—In an effort to calm the riff that erupted publicly among JCPenney’s board of directors, William Ackman, the activist investor and a major shareholder, agreed late Monday to resign from the board.
“At this time, I believe that the addition of two new directors and my stepping down from the Board is the most constructive way forward for JCPenney and all other parties involved,” said Ackman, who is founder/ceo of Pershing Square Capital Management, a hedge fund that controls about 18% of JCPenney’s stock.
The board also released a statement of “overwhelming support” for its Chairman Thomas Engibous, and CEO Myron “Mike” Ullman, both of whom Ackman sought to replace in letters made public last week.
Ackman will be replaced by two new directors. One is Ronald W. Tysoe, a former vice chairman for Federated Department Stores who’s known for financial acumen. The addition director, “another highly qualified” individual is expected to be named presentlym, the company said.
The news of Ackman’s departure was applauded by many retail analysts who said his conflicts with the board had obscured JCPenney’s greatest problem: turning around the business from a $1 billion loss last year and a 25% drop in sales. While JCPenney had has problems with declining share previously, the situation became worse under the 17-month tenure of CEO Ron Johnson, the former Apple retail chief who had been championed and supported by Ackman for the job.
JCPenney ‘Needs Stabilization’
“The company needs stabilization. The key is getting through this back-to-school and Christmas season in order to reinvigorate traffic,” Dana Telsey, chief executive of the Telsey Group told CNBC. “Boardroom fights don’t need to be played out on Main Street.”
Although Ackman has left the board, his presence is still likely to be felt, according to financial sources. According to an interview with CNBC, Ackman said he didn’t plan to sell the 18% stake his hedge fund invested in the retailer at a value of about $25 a share. With JCPenney’s troubles and its subsequent stock drop, Ackman’s hedge fund lost an estimated $600 million in the stake.
“If I wanted to sell I could have sold all along during the quarterly window,” Ackman told CNBC today.
Ackman is bound by certain regulations about how and when his company’s share could be traded but he still has ability to actively lobby the company—along with his friendly fellow hedge fund pals—or “adjust his holdings as an outsider,” the Wall Street Journal reported.
But as Walter Loeb, retail consultant wrote in Forbes: “The transformation that Ron Johnson started and that Mike Ullman is now tweaking has left the stores a mess. Fixing the mess is an urgent matter. A wise merchant, and one of JCPenney’s major competitors, said to me that he, and his associates, hopes that JCPenney will be strong again.”
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