“JCP is at a crucial stage in trying to affect a turnaround. Any interference with this is counterproductive and can only further add to the line-up of challenges,” Credit Suisse analyst Michael Exstein writes in a research note on Thursday. Exstein rates the company at underperform.
Hedge fund investor Bill Ackman’s statements “as well as public attention to internal political conflict, will in our opinion, only contribute further to the pressure on the company as it is registering a negative EBITDA every day the doors are open,” the note says. “We continue to remain cautious on these shares. The very public debate around Mr. Ullman’s tenure will only make it more difficult to attract senior level executives to J.C. Penney.”
J.C. Penney shares were down 3.8% to $13.14 on Friday.
The stock retreated following a spike on Thursday after Ackman of Pershing Square Capital Management, who owns just under 18% of the company and is a J.C. Penney director, sent a letter to the board expressing his frustration at not finding a permanent CEO to replace Myron “Mike” Ullman sooner. The stock rallied as investors interpreted the letter to mean that change was coming soon.
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In the letter, Ackman said even though the board had made the decision to search for a permanent CEO at the time of Ullman’s rehire in April when he replaced former Apple (APPL) executive Ron Johnson, the company had just started to address the search for a CEO last month.
“As J.C. Penney’s largest shareholder, I strongly urge that we immediately put together a short list of candidates, determine their interest level, and schedule a fast-track interview process with the board,” the letter said. “We can’t afford to wait.”
Ackman is demanding that a new CEO be in place within the next 30 to 45 days, a timeframe that was suggested by former J.C. Penney veteran Allen Questrom, who agreed to return as Chairman under the “right conditions,” according to the letter.