background is in order: Ron Johnson, the leader of Apple's wildly successful retail store efforts has just been named the CEO-in-waiting of JC Penney, long considered a big-name brand but a stodgy traditional retailer. Mr Johnson is not exactly Alice in Retail Wonderland: his last stop before Apple? Target.
The appointment is interesting from a couple of perspectives: it signals that Penney wants to leap full force into the social/mobile retail age and thinks Mr Johnson, with his exquisite design sensibility and customer service chops is just the guy to do it. It also raises the question of where Apple goes next. There is clearly a transition of sorts occurring as Steve Jobs health and the iCloud venture suggest new fields of endeavor for everyone's favorite tech company. Retail is taking on a new dimension, at once tangible and intangible. Both Penney and Apple will be forces to watch. JL
Elizabeth Holmes and Joann Lublin report in the Wall Street Journal:
"J.C. Penney Co. is tapping Ron Johnson, head of Apple Inc.'s iconic retail stores, as its new president and next chief executive, a rare poaching that was set in motion by a pair of activist investors. Mr. Johnson, 52 years old, will become CEO in November, succeeding long-time leader Myron "Mike" Ullman. Mr. Ullman, who has been CEO and chairman for six and a half years, will become executive chairman.
The changes were kick-started by a pair of activist investors who amassed 26% of Penney's stock last year. The investors – William Ackman of Pershing Square Capital Management and Steven Roth of Vornado Realty Trust – won spots on Penney's board and suggested bringing Mr. Johnson on as a director as well.Penney stock jumped about 18% on the news.
J.C. Penney had reached out to Mr. Johnson three or four years earlier, but he was too involved with Apple. The board seat got Mr. Johnson interested, and eventually the conversation turned to more serious discussions about bringing him in as the company's next CEO, Messrs. Ullman and Johnson said in an interview.
The appointment could prove lucrative for Mr. Johnson, but he's taking on a big risk that he can improve the value of J.C. Penney's stock. In filings Tuesday, J.C. Penney said it would issue Mr. Johnson stock to compensate him for the $50 million in soon-to-vest equity awards he will leave behind at Apple. But Mr. Johnson will then turn around and pay just under $50 million— or $6.89 a share—for warrants to buy 7.26 million shares of Penney stock.
The warrants can be exercised six years from now at $29.92 a share, which could mean a big payday for Mr. Johnson if he can get the stock up but puts his $50 million at risk if he can't. Mr. Johnson will also get a salary of $1.5 million and a shot at an annual bonus.
The move is a coup for J.C. Penney, a middle-of-the-road chain of 1,100 department stores that faces stiff competition from Macy's Inc. and Kohl's Corp. Total sales last year reached $17.8 billion, up 1.2% from 2009 though still well below its pre-recession levels.
With his appointment, Mr. Johnson will be the latest executive to try his hand at reinventing the tired department-store retail experience. He won kudos for reimagining the concept of the retail store at Apple, whose outlets have become one of the most popular destinations in an otherwise barren mall landscape.
Apparel retailers have long admired Apple's store environments, including their spare, uncluttered layout and use of handheld checkout devices. It's a sharp contrast to department stores, which have been criticized for their sprawling layouts, dowdy merchandise and tired facades.
Mr. Johnson joined Apple in 2000 and has since opened more than 300 stores for the company. He came from Target Corp., where he was vice president of merchandising for stores.
"Ron is excited about this opportunity and we hope it goes well for him," an Apple spokeswoman said. "We've got a great retail team in place and are actively recruiting for his replacement."
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