JCPenney's New CEO Could Make The Brand Great Again
The brand has had an interim chief executive since Ron Johnson left the chain in April 2013 following a disastrous 16 months on the job.
JCPenney's shares are rising on the news that Ellison, formerly of Home Depot, will join the company in November.
Ellison's track record at Home Depot indicates that he could turn the brand's business around, Brian Sozzi, chief equities strategist at Belus Capital Advisors, said in a note to clients.
JCPenney has struggled to rebound since sales tumbled 32% last year. Despite interim CEO Mike Ullman's attempts to bring back customers with promotions, the brand has been hurt by declining mall traffic and poor consumer perception.
Ellison spent eight years at Home Depot, most recently serving as executive vice president of stores.
Despite not having an apparel background, Ellison is "very strong operationally," making it likely that he will trim expenses and maximize profits, Sozzi writes.
He is largely credited with turning around Home Depot's business after the housing crisis several years ago.
Ellison also improved customer service and improved e-commerce during his time at Home Depot, giving him experience that JCPenney could benefit from, Sozzi said.
As more shoppers turn online, a renewed focus on e-commerce is necessary for JCPenney's future.
"Ellison's operational background is needed," Sozzi writes. "Let the veteran merchants around him do the apparel and sneaker buys. The market is right in sending the stock higher pre-market on the news."