Marvin Ellison's 12 years of experience at Home Depot Inc. should outweigh the executive's limited success turning around struggling department store chain J.C. Penney Co. Inc. as he heads into the top job at Lowe's Cos. Inc., several analysts told S&P Global Market Intelligence.
Ellison, who resigned as chairman and CEO of J.C. Penney on May 22, is returning to home improvement retail. Ellison worked at Lowe's larger rival Home Depot from 2002 to 2014, most recently as executive vice president of U.S. stores. He will become CEO of Lowe's on July 2.
Ellison's tenure at J.C. Penney has been marked with store closings and job cuts,
J.C. Penney's fiscal first-quarter earnings, reported May 17, lagged those of other department store chains. While J.C. Penney lowered its fiscal 2018 guidance, Macy's Inc. and Kohl's Corp. raised theirs.
"J.C. Penney still has a long way to go in terms of the store closures that many Wall Street analysts have been hoping for," Brown said. "Their overall trend has been one of improvement, just not as fast as some others we're seeing."
With Lowe's, Ellison is re-entering a far less challenged sector of retail, and one Ellison is more familiar with, RBC Capital Markets analyst Scot Ciccarelli said in a May 22 note. He noted that J.C. Penney shares went from around $8 per share in August 2015, when Ellison officially took the helm of the department store chain, to a peak of nearly $12 per share in March 2016, but have since plummeted to close at $2.28 per share on May 22, according to S&P Capital IQ.
"Much of that is likely industry-related, but it is probably fair to say that Mr. Ellison had some mixed levels of success," Ciccarelli said.
Neither J.C. Penney nor Lowe's responded to S&P Global Market Intelligence's request for comment.
J.C. Penney's lackluster performance in the most recent quarter "may not be quickly forgotten" as Ellison goes into Lowe's, Jefferies analyst Daniel Binder said in a note circulated to clients May 22.
"We understand this will be a show-me story, and Mr. Ellison will need to show some early wins to get some investors off the fence," he said.
That said, Ellison's experience building up Home Depot's stores should be more important than J.C. Penney's performance in the long term to Lowe's investors, Gabelli & Co. Inc. analyst Alvaro Lacayo said in an interview.
At Home Depot, Ellison was known for refocusing the company's store associates and moving many positions to be customer-facing, Lacayo said. He also helped to grow Home Depot's business serving contractors — both areas Lowe's needs to improve to compete with Home Depot. Lowe's is due to report first-quarter earnings May 22.
"There's a lot of room for improvement at Lowe's," he said. "And a lot of it is things that Marvin Ellison helped establish at Home Depot."
