JC Penney falls to record lows as CEO Marvin Ellison quits to head up Lowe’s

Troubled department store chain JC Penney (JCP) suffered yet another setback after Chairman and CEO Marvin Ellison stepped down amidst mounting losses and debt. It is believed the abrupt departure would have a negative impact on the company’s ongoing turnaround efforts. Ellison will be taking up a leadership role in Lowe’s Companies (LOW), an operator of home improvement and appliance stores.

Shares of JC Penney, which plunged around 30% since the beginning of the year, lost more than 5% in early trading on Tuesday to hit an all-time low. The company, which is struggling to recover from a losing spree, last week reported lower-than-expected comparable store sales for the first quarter and blamed bad weather for the unimpressive performance.

While JC Penney has named Ronald Tysoe as the new chairman, the responsibilities of the CEO will be shared among the top executives until a successor is identified, which according to experts will be a tough task considering the company’s poor fiscal condition. Ellison will join Lowe’s as president and chief executive officer, effective July 2, filling the vacancy created by the retirement of Robert Niblock.

It is believed the abrupt departure would have a negative impact on the company’s ongoing turnaround efforts

Ellison came to JC Penney after a 12-year stint with Lowe’s arch-rival Home Depot (HD), where he held various leadership positions. He was instrumental in transforming JC Penney into a home appliances retailer from an apparel store operator. He also initiated an extensive restructuring program with a focus on massive store closures and layoffs, after becoming the CEO in 2015.

The efforts, combined with a revamped e-commerce platform, helped JC Penney improve its finance significantly. However, the reforms were not sufficient to bring back the lost momentum to the company’s business, which continued to face strong headwinds from growing competition and widespread adoption of online shopping among customers.

The task that awaits Ellison at Lowe’s is equally challenging, though its operating performance and debt level are much better compared to JC Penney. In general, the long-term outlook for the American department store sector is not very encouraging, with the primary risk being the onslaught of multichannel retailers like Amazon (AMZN) and Walmart (WMT).