J.C. Penney Fires Operating Chief West, Won't Say Why

J.C. Penney Co., the third-largest U.S. department store company, fired Chief Operating Officer Catherine West six months after she joined the retailer.

The company didn't say why it terminated West and spokesman Tim Lyons declined to comment. West's departure is effective immediately, Plano, Texas-based J.C. Penney said today in a statement. The shares fell 1 percent.

Store operations, property development and logistics will again report directly to Chief Executive Officer Myron Ullman as West will not be replaced. Under Ullman, the company has accelerated store openings to encourage more shopper visits and added private brands including X-Games and Vans children's clothing.

``It's as much news to us as anyone else,'' said Arun Daniel, a New York-based analyst with ING Investments LLC. The firm manages $40 billion, including J.C. Penney shares. ``J.C. Penney's execution the last few years has been flawless. Based on the trends so far, there's nothing concerning us as it relates to operations or in-store execution.''

West, 47, left her job as president of Capital One Financial Corp.'s U.S. credit-card business to join J.C. Penney in July. Before joining Capital One, West spent nine years at First USA Bank and previously ran the credit-card operations at Chevy Chase Bank FSB.

Attempts to reach West or Ullman for comment at the J.C. Penney headquarters were directed to the company's media relations department.

Shares of J.C. Penney fell 76 cents to $77.64 at 4 p.m. in composite trading on the New York Stock Exchange. They have climbed 40 percent this year and in November hit a record $82.49.

Severance, Compensation

West's severance package, standard for executive board members, includes 18 months base salary, or about $1.13 million, a ``target performance bonus'' and ``acceleration of any equity,'' said company spokeswoman Kate Parkhouse. She declined to elaborate on the value of the bonus and equity.

West was granted stock options valued at $17.1 million as part of a compensation package after she relinquished benefits at Capital One, the company said in a filing with the U.S. Securities and Exchange Commission in June.

She was also to receive $750,000 in salary, a minimum cash incentive payment of $1 million and restricted stock units valued at $3 million.

West was ranked 46th on Fortune magazine's 50 most powerful women in business in 2006. Her maternal great-grandfather and grandfather were top executives at Chicago department store Marshall Field & Co., according to an August 2005 profile in Virginia Business magazine.

West started her career at People Express Airlines in 1981 after graduating from Lynchburg College in Virginia.

`Unconventional' Choice

``I just think she didn't work out,'' said Robert Buchanan, an analyst at A.G. Edwards & Sons in St. Louis. He has a ``buy'' rating on the shares and doesn't own any. ``I thought it was unconventional to bring in someone from the outside.''

Ullman took over as J.C. Penney's top executive in December 2004, stepping in to complete a five-year turnaround begun by former CEO Allen Questrom. He has expanded offerings on items including furniture and is introducing exclusive brands such as the Ambrielle lingerie collection to boost sales.

The company's third-quarter profit rose 23 percent to $287 million as the new clothing brands drove the fastest sales growth in two years, J.C. Penney said Nov. 9.

`Smooth' Transition

``We do not believe Ms. West's departure represents a big loss,'' Deborah Weinswig, an analyst at Citigroup Inc. in New York, wrote today in a report. She has a ``buy'' rating on the stock. With Ullman resuming oversight of West's areas of responsibility, Weinswig expects a ``smooth'' transition.

Operations will go back to its previous structure as Ullman will oversee executive vice president Michael Taxter and senior vice presidents Michael Dastague and James LaBounty, Parkhouse said.

The last COO prior to West was Ken Hicks, who was promoted to president and chief merchandising officer almost two years ago.

As of Oct. 28, the company operated 1,037 department stores in the U.S. and Puerto Rico. The company has said it plans to open more than 175 stores in the next three years.

Source: Bloomberg.com Danny King and Heather Burke