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J.C. Penney CEO’s challenge: Is it even fixable?

Mike Ullman

AP/File

Mike Ullman will have to find ways to boost employee morale amid severe cuts that have slashed the workforce by nearly 30 percent.

NEW YORK — There won’t be an easy fix for J.C. Penney — if it can be fixed at all.

As Mike Ullman takes the reins again less than two years after his departure, he faces a Herculean task to undo the mess left by chief executive Ron Johnson, who was ousted Monday. With the department store retailer in the middle of a disastrous overhaul that has driven away shoppers, the 66-year-old Ullman has to quickly figure out what parts of Johnson’s legacy to keep and what to trash.

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The overarching question is whether the century-old company can be saved at all. Very few retailers have recovered from a 25 percent sales drop in a single year, like that suffered by Penney under Johnson’s watch. On Tuesday, the retailer’s stock price dropped more than 12 percent to a 12-year-low of $13.93 as investors’ worries escalated about Penney’s future.

‘‘Ullman can’t go back to the old ways, but he can’t do what Ron Johnson did,’’ said Ron Friedman, head of the retail and consumer products group at Marcum LLP, a national accounting and consulting firm.

Apparently, the company’s board of directors felt Ullman, who served as Penney’s chief executive for seven years and is known for strong relationships with suppliers and calm, steady execution, would be the best choice right now to secure the company’s future.

But it could take Ullman 18 months to stabilize the business, says Burt Flickinger III, president of retail consultancy Strategic Resource Group. He gives the chain a 50-50 chance to survive.

Johnson, the mastermind behind Apple Inc.’s successful retail stores, lasted just 17 months.

He faced an ever-growing chorus of critics calling for his resignation as they lost faith in the aggressive overhaul. The rapid-fire changes included getting rid of coupons and most discounts in favor of everyday low prices, bringing in new brands, and remaking its outdated stores.

Instead, Penney’s loyal shoppers went in search of deals elsewhere, and the chain didn’t attract the younger and more affluent shoppers that Johnson coveted.

Some speculate that Ullman may ditch the everyday price strategy and instead ramp up the return to discounting and coupons to get shoppers back in the stores. But that will still be an expensive move. Michael Binetti, an analyst at UBS Investment Research, and others believe that Ullman also will temporarily suspend the rollout of the mini-shops, which started late last year and feature such brands as Joe Fresh and Levi’s.

When the overhaul of its home area is completed next month, the company will have carved up 30 percent of its store space into miniboutiques. But after that, Ullman is expected to pull back the pace of the rollout as Penney tries to conserve cash. That means that some suppliers who expected to have minishops could be left in the lurch.

Ullman also will have to find ways to boost employee morale amid severe cuts that have slashed the workforce by nearly 30 percent. As of February, Penney employed 116,000 full- and part-time workers, down from 159,000 a year ago.

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