Bringing back the old CEO isn’t all that common. Apple Inc. (NASDAQ:AAPL) did it with Steve Jobs and achieved massive success. Starbucks did it, too, and came back from its decline. Now, J.C. Penney Company, Inc. (NYSE:JCP) and The Procter & Gamble Company (NYSE:PG) are both trying the management tactic.
We Have a Winner
Apple Inc. (NASDAQ:AAPL) struggled to find an industry niche while the personal computer industry was growing rapidly. Even then the current industry leader in tech gadgets kept everything close to the vest, from design to software. As the PC business was growing, however, it was the open nature of the Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) combo that was pushing sales.
Apple Inc. (NASDAQ:AAPL) slowly faded from the public eye, though it managed to keep a strong position in the education market. Eventually, the company ousted its leader, Steve Jobs. The new leaders tried to make the company more like the WinTel combo, but that just pushed the company further along its downward spiral. The board eventually brought Steve Jobs back by buying his new company, leading to a series of society-changing products being introduced at Apple Inc. (NASDAQ:AAPL).
At Another Crossroad
Apple Inc. (NASDAQ:AAPL) is now facing another crisis, as investors have correctly realized that the technology device maker can only keep growing sales for so long if it doesn’t bring out another incredible product or find new customers. That said, sales haven’t stopped growing yet, so the company’s 2.5% or so dividend yield may be worth the risk for growth investors looking for a fallen angel.
And, if the company can break into the Chinese market in a big way, heady growth could continue for quite some time. However, it is also important to remember that Jobs’ untimely death means that he can’t be brought back for a third time. So, Apple Inc. (NASDAQ:AAPL) needs to find its own path now.
A Penney for your Thoughts
J.C. Penney Company, Inc. (NYSE:JCP) is in the middle of a massive transition, too. It lost its way in the retail sector after the 2007 to 2009 recession left its target customers suffering. A slow decline in sales and a stale brand led the company to bring in Ron Johnson, an Apple retail alum.
That led to a disastrous attempt to completely remake J.C. Penney Company, Inc. (NYSE:JCP), shifting from the company’s historical sale-and-discount model to an everyday low price model. After training customers to only buy when prices were cut, the company saw sales drop 25% in one year. A shocking fall that led to the ouster of the new CEO and the return of the old one, Myron Ullman.
Back in the saddle again, Ullman is doing what he knows best. That means returning the discounts and sales, and inflating regular prices. Although that’s likely to appease the company’s customers, success could be short lived. After all, it was that very model that left sales in slow decline.
Investors betting on a big turnaround at J.C. Penney Company, Inc. (NYSE:JCP) should watch sales carefully. There’s likely to be a period of improvement as old customers come back followed by a return to slow decline. When that slow decline starts, shareholders are likely to jump ship. Most, however, should probably just avoid Penney for now.
An Emerging Market Misstep
The Procter & Gamble Company (NYSE:PG) has just brought back its former CEO, A.G. Lafley, after the ouster of Bob McDonald, his successor. After the company’s growth hit a wall when it tried to expand aggressively into emerging markets, tensions rose dramatically at the company. McDonald tried to quickly revamp the company’s growth plans, but it wasn’t enough to ease the internal conflict.
Having activist investor Bill Ackman on the scene during the retooling likely only increased the tension. The end result was the recent departure of McDonald and the return of Lafley. While too soon to see material changes, Lafley received high marks and achieved great success during his tenure. The Procter & Gamble Company (NYSE:PG) jumped on the news and is far from cheap.
Even under McDonald, the company remained a dominant and innovative industry player. So the recent change isn’t as large as the night-and-day change made at Penney. Long-term growth investors should still consider this nearly 3% yielder as it works through this rough patch.
The Big Picture
For Penney and The Procter & Gamble Company (NYSE:PG), the longer term picture is going to quickly return to succession. Both of the CEOs are in their mid-60s, so they won’t be around for all that long. While they may be able to keep the ships going, and perhaps get their respective companies back on track, they aren’t going to stick around forever.
That means recovery today and transition again in a few years. That switch will likely be a harder path at Penney than at P&G.
The article Back to the Future: CEO Style originally appeared on Fool.com and is written by Reuben Brewer.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple and Procter & Gamble. The Motley Fool owns shares of Apple. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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