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    CNBC commentator's thoughts on JCP CEO

    Why I Bought Into Ron Johnson's JC Penney Story
    April 09, 2013


    When I first heard Ron Johnson had been named CEO of J.C. Penney I thought, "Brilliant."

    Here was the guy who led the remarkable Apple Stores and, before that, merchandising at Target.

    Penney needed to be refreshed and Johnson appeared to be enough of an "out of the box" thinker to make it happen.

    As I wrote in late 2011, in a prediction I have lived to regret, "Never bet against a good merchant, especially one as motivated as Johnson, who obviously views this as the challenge of all retail challenges – one that will secure his legacy."

    It was the "legacy" bit that grabbed me. After all, Johnson didn't need the cash and there was no need to take risk destroying his legacy and reputation from Apple when he could likely have ridden off happily into the cushy California private equity sunset. We're not talking someone like Mickey Drexler, who did an "I'll show you" with J. Crew after he had been fired from Gap.

    We're talking somebody who, for whatever reason, had walked away from one of the most successful built-from-scratch retailers of our time.

    Turns out I hadn't counted on the one most obvious stumbling block: ego. Ego can fool even the smartest CEOs into thinking they're smarter than they really are, and Ron Johnson will go down as a classic example of that.

    This became evident on January 26, 2012, when Johnson led his new management team on the second of an analyst event in New York laying out his plans for the new JCP.

    If you go back and re-read the presentations, they're impressive and gutsy and slick. Never mind that Johnson invoked "Apple" too many times. So much of what he said, on the surface, made so much sense. And he said the transformation of the old J.C. Penney to the new JCP would take years. As a natural naysayer and skeptic, I've learned there are some things you just don't know -- the success of turnarounds, among them.

    But then....his chief operating officer opened his mouth and committed what I believe was the cardinal sin for any company in transition: He offered annual financial guidance. I'm not a fan of guidance, in general, but here we have a company trying to pull off the next-to-impossible giving guidance.

    Johnson went so far as to say, "Will we become America's favorite store?" he said. "Only time will tell..."

    Yet after his COO laid out the guidance, Johnson not only supported but harkened back to his days at Apple (yet again) and said: "I come from a company that hasn't missed guidance 25, 30, 40 quarters. Right? Sometimes the street guides ahead and we miss the street guidance. But I really believe in credibility, and there is absolutely no way [in] that guidance for 2012 that we didn't have extraordinary confidence we could meet or exceed."

    At that point, so early in the game, it became clear: Johnson was in over his head.

    (READ: Ron Johnson out as J.C. Penney CEO)

    Moral of the story: Like so many before him, Ron Johnson learned the hard way: Hubris can be extremely humbling.

    P.S.: For awhile, even after slamming Johnson on CNBC for offering guidance, I continued to believe he should be given a chance. But by year-end it appeared he was the wrong guy for what may be an impossible job, earning him the number three slot of my list of the year's worst CEOs. Offering guidance in a turnaround, in retrospect, was the tell-tale sign.

    --

    Herb is a senior stocks commentator for CNBC. You can follow him on Twitter and Facebook.

    (Photo Credit: Bloomberg Finance LP)
    Posted by:Herb Greenberg
    Herb Greenberg

    #2
    Interesting. Thanks for sharing.
    "Waste no time arguing what a good man should be. Be one." – Marcus Aurelius

    Comment


      #3
      Funny thing is they rehired the guy that MADE the mess for Johnson to clean up! The board will most likely all be fired as shareholders are pissed off etc.

      Comment


        #4
        Originally posted by shad0w4life View Post
        Funny thing is they rehired the guy that MADE the mess for Johnson to clean up! The board will most likely all be fired as shareholders are pissed off etc.
        Exactly, sounds like they need a new board rather than CEO.

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