Activist investor Ackman quits JC Penney board

The hedge fund activist Bill Ackman has conceded defeat in his battle to oust the leadership of JC Penney by resigning from the board of America’s most imperilled big retailer after a public dispute with fellow directors.

JC Penney announced the resignation of its biggest investor on Tuesday. The department store is struggling to recover from a 25 per cent fall in annual sales precipitated by Ron Johnson, its former chief executive, who Mr Ackman hired from Apple in 2011 only for him to leave under a cloud this year.

Having failed to show that Apple’s retail magic could be applied to selling clothes and kitchenware, the retailer is now likely to become a case study in the power of investor activism.

Mr Ackman, whose Pershing Square fund owns nearly 18 per cent of JC Penney, is one of the most divisive figures in the investment world. Last week he called publicly for the departure of JC Penney’s chairman and its chief executive and said the board had “ceased to function effectively”.

Thomas Engibous, JC Penney’s chairman, hit back by calling Mr Ackman’s comments “misleading, inaccurate and counter-productive”. In a regulatory filing on Tuesday, JC Penney said Mr Ackman was leaving due to “disagreements” over the timing of a search for a new chief executive.

Mr Ackman was unhappy with the performance of chief executive Mike Ullman, who he had helped remove to install Mr Johnson two years ago, only to see him brought back this April to stabilise the company. The shares fell 2.9 per cent to $12.79 in response to the resignation. According to an investor in Mr Ackman’s fund, it does not have to sell its JC Penney stake and may continue to hold it.

Liz Dunn, analyst at Macquarie, said she considered Mr Ullman the right leader for the time being, but noted: “There is not a consensus out there as to whether or not Ullman’s leadership is a good thing.”

Before Mr Ackman began to shake up JC Penney in 2011, it was regarded as a tired chain that lacked purpose in an era of ecommerce and “fast fashion” retailers such as Zara.

He leaves with JC Penney dogged by persistent questions about its liquidity – analysts estimate that it burnt through $1.2bn of cash in the quarter to the end of June – and a permanent watch on suppliers’ willingness to sell to it.

The retailer said on Tuesday that the board “reaffirmed its overwhelming support” for Mr Ullman and Mr Engibous.

Mr Ackman will be replaced by Ron Tysoe, a former vice-chairman of Macy’s, a rival department store.

The activist investor defended his record at JC Penney, saying he was given “perhaps too much of the blame” for the Johnson era. He noted that when Mr Johnson was hired he was feted as a star retailer and said that Mr Ullman, in his first stint as chief executive, had wanted to hire Mr Johnson as his successor.

George Soros, the billionaire fund manager who owns nearly 8 per cent of JC Penney, had sided with management against Mr Ackman in recent days, according to Bloomberg.