Ellison is a highly qualified, popular, experienced retailer and one of only three black CEOs of Fortune 500 companies. Why did he take this opportunity? Here are five considerations for CEO candidates:
Mission Accomplished? JC Penney just reported disappointing results 2018 Q1, consistently missing forecasts citing bad weather and facing intensified competition from stronger players such as Walmart and Target, following a 60 percent drop in 2001 stock price with pronouncements of strategic reversals.
Predecessor Mike Ullman returned to office for two years after a devastating 17-month tour of duty by his immediate successor, Ron Johnson, who had been promoted by activist investor Bill Ackman. Johnson shattered the culture with massive layoffs and drove away the core customer base with high fashion merchandise in a failed attempt at transformation. Ullman, who had built the soaring Sephora division delivering of the most profitable earnings in JCP’s history, returned for two years to stabilize JC Penney from its tailspin before he handed the keys over to Ellison.
Ellison’s mission of focusing on branded store departments, omnichannel retailing and consolidating operations is far from complete. In a recent Equilar study, the median tenure for CEOs at large-cap (S&P 500) companies was 5.0 years by the end of 2017. Ellison leaves JC Penney with a mixed reputation—and weaker than when he arrived four years earlier.
“While JC Penney has a sensible board, many would argue that the Lowe’s board is stronger.”
Frying Pan to Fire? Perennially in the shadows of rival Home Depot, Ellison accepted the Lowe’s position on the eve of an expected healthy growth in revenues and earnings Q1 report that is still dampened by the poor spring weather for home building and remodeling. He follows a predecessor who was in office for 13 years. With the coming summer months of great weather after Memorial Day, this could have been great timing for benchmarking expectations.
Board Trade up? While JC Penney has a sensible board, many would argue that the Lowe’s board is stronger, while a bit too large at 12 (versus nine at JC Penney), but with most of the board experienced in major retail and consumer products enterprises. It is revealing that the JC Penney board had no ready succession plan for the upheaval. Further, Lowe’s board has the responsible activist David Batchelder, formerly of Relational Investors, who worked closely with former Home Depot CEO Frank Blake, current CEO Craig Menear and Ellison in a hugely successful revival of Home Depot. He and Ellison share great appreciation off their respective styles and values, as well as terrific industry knowledge and a bond of trust.
Loyalty to a Past Employer? Retailers regularly have hopped across firms. In fact, Alan Questrom, a former JC Penney CEO, also led Macy’s, Nordstrom and Barney’s. While Ellison knows the secret sauce of Home Depot, it is not a static recipe.
A Chance of a Lifetime? Eric Schmidt left the foundering local network software company Novell destined for failure after gaining great star power as CTO of Sun Microsystems. Returning to the frontiers of technology and innovation, Schmidt brilliantly led Google for 17 years of unprecedented growth with no mention ever of his Novell setback. Ellison knows Lowe’s business better than any possible candidate so it represents the perfect deus ex machina – the ancient plot device of sudden chariots from sky to save mythic Greek heroes trapped in certain trouble.