J.C. Penney Fails to Tap HSN's Grossman as CEO and Here's Why

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NEW YORK (TheStreet) -- Despite having a pulse this year after a disastrous 2013, J.C. Penney   can't secure a permanent CEO to take the reins from current leader Mike Ullman. 

According to a Wall Street Journal report, Mindy Grossman, the CEO of Home Shopping Network , who is a highly regarded retail industry executive, turned down the chance to become J.C. Penney's next chief some two months ago. That means Grossman turned down the gig around the time of J.C. Penney's May 15 first-quarter earnings report, in which it delivered both top- and bottom-line results that were ahead of Wall Street expectations.

The stock, which my firm, Belus Capital Advisors, upgraded on April 10 to hold from sell citing an attractive near-term risk reward, popped 16% from May 15 to May 16. It has shed 10% since.

Understanding why J.C. Penney approached Grossman is fairly obvious -- her track record in retail is strong. In her nine years at Polo Ralph Lauren , Grossman spearheaded the launch of the value-oriented Chaps and Polo jeans collections. While spending six years at Nike , she built up the women's apparel business.

Since joining HSN in 2006, Grossman has focused on new ways to reach the type of customers who might shop at J.C. Penney. That shopper is a female head of household whose family pulls in $35,000 to $75,000 annually and demands affordability for discretionary merchandise. Grossman has sought to target that customer's disposable income by infusing celebrity-inspired apparel and accessories collections into the mix at a great value, as well as adding higher-quality offerings from lesser known designers.

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Here is why Grossman may not have wanted to be the next CEO of the struggling retailer.

The new J.C. Penney already has been rebuffed by the U.S. consumer : In a recent interview with Inc., Grossman said, " I believe that if you don't disrupt yourself, you will be disrupted by someone else." J.C. Penney won't be disrupting the stodgy department store sector anytime soon, a painful lesson that was learned by its former CEO Ron Johnson. J.C. Penney's low- to middle-income shopper, first and foremost, wants discounts on merchandise season after season, not a new shopping experience that may bring with it higher ticket prices.

Additionally, with J.C. Penney's weakened financial state, Grossman would have limited ability to test new in-store and online initiatives.

The end result is that Macy's , which has been leading the department store channel in terms of same-store sales growth and in-store reinvention, with, for example, new Finish Line   sneaker and Levi's denim shops, continues to capture the growing number of deal-seeking shoppers.