Questrom, Allen I. 1941–

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Allen I. Questrom
1941–

Chairman and chief executive officer, J. C. Penney Company

Nationality: American.

Born: April 13, 1941, in Newton, Massachusetts.

Education: Boston University, BS, 1964.

Family: Married Carol Kelli (former executive at Ralph Lauren).

Career: Abraham & Straus, 1965–1973, began as executive trainee, became division merchandise manager; Bullock's, 1973–1974, vice president and general merchandise manager of the home store; 1974–1977, senior vice president and general merchandise manager for all stores; Federated Department Stores, 1977–1978, executive vice president of Bullocks Division; 1978–1980, president of Rich's Division; 1980–1984, chairman and CEO of Rich's Division; 1984–1988, chairman and CEO of Bullock's/Bullocks Wilshire Division; 1987–1988, corporate executive vice president; 1988–1990, corporate vice chairman; Neiman Marcus Group Inc., 1988–1990, president and CEO, based in Dallas; Federated Department Stores, 1990–1997, chairman and CEO; Barneys New York, 1999–2000, chairman, president, and CEO; J. C. Penney Company, 2000–, chairman and CEO.

Address: J. C. Penney Company, 6501 Legacy Drive, Plano, Texas 75024; http://www.jcpenney.com.

■ Allen Questrom became the first outsider to assume the top position at J. C. Penney in the company's one-hundred-plus-year history in 2000. He brought with him a track record of turning around struggling companies, including Neiman Marcus and Barneys, and an expertise in brand management and customer service. One of the most well-respected executives in the retail industry, he preferred bold moves and jobs that presented enormous challenges. As a manager he was adept at engineering large-scale change in companies that had been mired in outmoded business practices for decades. He took the lead of a troubled company at an age when most of his peers were

winding down their careers. Part of Questrom's motivation for continuing to take on such arduous work appeared to have been his driving need to succeed—although he had also felt undercompensated by a previous employer and had sued to prove it.

A PASSION FOR SPORTS TAKES AN UNLIKELY TURN

Questrom grew up in working-class Waltham, Massachusetts, where his father owned a machine shop. After graduating from Boston University, where he majored in finance and played quarterback on the football team, Questrom decided to be a ski bum for a year. But a drought in the Northeast foiled his plans and at his parents' suggestion he looked for a job instead. After answering an ad in the local paper he enrolled as a management trainee with Federated Department Stores' Abraham & Straus division, partly because he wanted to see what it would be like to work in New York. He eventually rose to executive vice president of Bullock's department stores in Los Angeles, which he transformed with his customer-focused strategy.

A TURNAROUND ARTIST MAKES MANY MARKS

In 1978 Federated moved Questrom to Rich's, a department store in Atlanta that had earned the dubious distinction of being the company's worst performer. Four years later Questrom had turned Rich's into Federated's most profitable division, earning him a position as president and later as chairman and chief executive. As Questrom described in Chain Store Age Executive, "Rich's had been run by the family since the beginning. It was a very entrenched organization; they really talked a lot about the past, even though at the present they were not doing well and had not done well for three or four years. It took a lot of time to get people to refocus themselves not on what they did but on what they were doing and who else was doing better than they were at the time" (September 2000).

Questrom's next turnaround project was Neiman Marcus, which was headquartered in Dallas. By the time Questrom took over as chairman and CEO in 1988, Neiman had shed its reputation for exemplary customer service; Questrom made an immediate impact on the company by personally focusing on that realm of the business. Early on, a letter from an angry customer crossed his desk; the woman had received poor customer service and had been obligated to drive 90 miles back to a suburban New York store to pick up her credit card because a clerk had failed to return it after a purchase. Questrom called her and sent her a gift certificate along with a plea to give the company another chance. He circulated her letter to employees, reminding them that the customer always came first.

A CAREER-CROWNING ACHIEVEMENT

When Questrom became chairman and CEO of Federated in 1990 the company was mired in debt. In BusinessWeek Questrom said, "At the time, everyone was telling us that the department store was a dinosaur" (November 28, 1994). By cutting costs, adding inventory-tracking technology, and bringing order to the stores, Quelstrom miraculously took the company out of Chapter 11 bankruptcy proceedings. In particular Questrom led Federated to increase the amount of private-label merchandise carried by the stores. Questrom felt it to be important to develop private labels as brand concepts throughout stores and pushed the proportion of private labels in Federated's home-furnishings business from 14 percent to more than 20 percent.

In 1994 Questrom led Federated's successful bid for the debt-ridden R. H. Macy & Company, an acquisition that significantly raised the company's profile. Questrom then engineered the acquisition of the financially troubled Broadway chain, which operated 82 stores, mostly in California. Although the company was left with a hefty debt of about $5 billion as a result of the deals, it also became the nation's largest retailer. Bob Morosky, who briefly ran Federated before being replaced, stated in BusinessWeek, "Questrom solidified the organization and boosted morale. I think he's superb—and for me to say that is a big deal since he got the job I wanted" (November 28, 1994).

Questrom abruptly retired from Federated in May 1997, a year earlier than expected, and shocked colleagues by suing Federated for $47 million in back pay, a suit which he consequently lost.

PERFORMANCE, NOT AGE, COUNTS

After a short term as chairman and CEO of Barneys, Questrom was named Chairman and CEO of J. C. Penney Company, which operated J. C. Penney Stores, the J. C. Penney catalog, the Eckerd Drug Store chain, and other Internet retailing businesses. The career move presented Questrom with an opportunity to make his mark on "one of the legendary names in American retailing" (July 27, 2000). J. C. Penney, which had more than 290,000 employees in the United States and Latin America, reported fiscal 2000 sales of $32.5 billion.

Questrom stood apart from many of his J. C. Penney predecessors, not least of all because of his age—he signed his five-year contract with the company at 60, an age when J. C. Penney executives traditionally retired. When asked about retirement in Chain Store Age Executive, Questrom remarked, "Even though I have retired on many occasions, I'm not sure there should be any date. As long as the person wants to be interested and excited about the business, they can go on and on" (September 2000).

Questrom's career stamina may have been a product of his well-balanced lifestyle. He was once an avid fundraiser for United Way and he enjoyed ballroom dancing with his wife after hours. In 1984, when his standing with Federated was at an all-time high, he took a sabbatical to travel around the world with his wife. He noted in the Los Angeles Times, "It was a terrific sabbatical. It gave me an opportunity to think about retail and get to know my wife" (December 10, 1989).

THE MOUNT EVEREST OF CAREER CHALLENGES

News of Questrom's appointment at J. C. Penney was received favorably on Wall Street, and Jeff Edelman of PaineWebber upgraded his rating of the company from "attractive" to "buy," raising his 12-month price target from $20 to $25. Still, Questrom's job would prove more daunting than his previous turnaround projects. In 1999 operating profit for J. C. Penney department stores and its catalog dropped to $670 million, slightly more than half the $1.275 billion total from 1997. Eckerd didn't fare much better, with $183 million in operating profit in 1999 versus the $347 million of 1997. For the second quarter ending July 29, 2000 (just two days after Questrom was appointed to the top spot), Penney reported a net income of $23 million, versus the $39 million from the year before.

The poor financial statistics were exactly what attracted Questrom to the job. As he described in Women's Wear Daily, "I thought Penney's had lots of potential that was not being fully appreciated. It's like climbing another mountain. You look at one and say you want to climb it, and then you want to climb the next mountain. It's the way one looks at life, asking what's the next challenge. I felt this was an interesting one, in the sense that Penney's hadn't done well for several years and it had good brand recognition" (December 12, 2000).

Unlike Federated, which needed nothing more than a financial makeover, J. C. Penney lacked the respect and loyalty of shoppers. It failed to respond quickly enough to competition from trendier outlets, including Kohl's and Old Navy. Simply stated, the company had an image problem. In BusinessWeek, Alan Bergstrom, the head of The Brand Consultancy in Atlanta, said, "Questrom's main task is to redefine what the brand is all about" (February 12, 2001).

It would be a job that played to Questrom's strengths. Elliot Cole, the senior partner in the law firm Patton Boggs who sat on the board of Boston University with Questrom, said in Women's Wear Daily, "Allen is the most focused guy I have ever met. He doesn't suffer fools and doesn't waste time. No matter where he was and what the brand is, Questrom understands it quickly. The world is talking about branding, whether it's Neiman's or Macy's. Questrom is very malleable into whatever brand it is his job to serve" (July 28, 2000).

A MASTER OF CHANGE

Before developing a strategy for J. C. Penney, Questrom vowed to spend several months in the field discussing key issues with the employees who knew the stores best. When asked how long it took to change a company's culture in Chain Store Age Executive, he replied, "The culture change is glacial. If what you think you're going to do is totally change the culture in a company that's been around 98 years in two years you're wasting your time. But you can get people to change attitudes on some things and, as you build on that, people will change. But you have to have a couple of wins. If you don't have a couple of wins, it's impossible to change anybody" (September 2000).

Questrom's charming, selfless personality helped. He believed in lavishing praise on employees, seemed more interested in what others were saying than in his own opinions, and was skilled at effectively delegating. As noted in the Los Angeles Times, a sign from his Bullock's days that hung behind his desk underscored his philosophy. It read, "There's no limit to what a person can do if they don't mind who gets the credit" (December 10, 1989).

A buzzword for Questrom was "refocus." He believed that in order to change long-standing beliefs and business practices one had to motivate employees to capitalize on their strengths. He remarked in Chain Store Age Executive, "Most always in companies, there are very good people. Just because businesses don't do well, it's not because they are terrible people. It's what's asked of them. It's what you focus on. And the challenge, in my opinion, for any good manager of a company is to get the present cadre of people to refocus" (September 2000).

Once employees knew what was expected of them, Questrom demanded results. In Women's Wear Daily, Ron Frasch, the chairman and CEO of Bergdorf Goodman who once reported to Questrom, said, "He's a griller. I'll never forget one executive committee meeting. He was challenging the men's GM on umbrellas, grilling him about black umbrellas, fold-up umbrellas, fashion umbrellas, umbrellas with canes. How many? What was selling? The GM didn't know. Questrom didn't yell or scream. He's not a screamer, but he challenges every assumption. The point is, if you're working for Questrom you better damn well know every detail about your business. And you better know what's going on with the competition. That's how you become a better executive working with Allen—even if you don't know it at the time" (December 12, 2000).

HIRING 101

At J. C. Penney, Questrom set in motion a five-year plan to rescue the embattled retailer that focused on improving marketing, merchandising, profitability, and hiring. He advocated hiring outsiders with fresh perspective who could fill various expertise gaps in the company. Under J. C. Penney's traditional management pipeline, almost 100 percent of executives were developed internally; Questrom hoped to increase the percentage of outside talent to about 20 percent in order to keep new ideas flowing into the company.

Questrom believed in hiring the right person for the job, even when his personal inclinations might have suggested otherwise. At Federated, Questrom once hired Michael Gould (the CEO of Bloomingdale's), who had run Robinson's when Questrom ran archrival Bullock's. Said one executive in BusinessWeek, "Allen and Michael don't like each other. That's part of Allen's genius: to hire somebody you've been an enemy with and say, 'Look, we don't have to love each other, but you're the best guy for this job'" (November 28, 1994).

FOCUSING ON CUSTOMERS

The guiding force of Questrom's business strategy was always to focus on the customer. At Barney's he changed a culture where employees had spent more time buying and selecting merchandise than visiting customers and salespeople in the stores. In his view J. C. Penney's management had forgotten about the very people that kept the company in business.

Questrom took a coast-to-coast tour of 60 J. C. Penney stores and competitors, and what he saw didn't impress him. The merchandise was too safe and too conservative and offered little that customers couldn't buy at other stores. As the new CEO he mandated that his employees stock clothes that were both fashionable and price conscious, hiring trend spotters to scour the coasts and translate must-have looks for its target customers: families with annual income between $30,000 and $80,000.

Questrom remarked in Chain Store Age Executive, "If it gives a zing to the product and it's reasonably priced, then it works. But if it's just to have a designer name out there, I'm not sure it makes a lot of sense. I think a lot of these designer labels will backfire if they don't continue to give value to the customer" (September 2000). Using Gap as an industry role model, he implemented subtle fashion twists, such as deviating from the standard blue and white colors offered by the company's men's line.

A CLOUDY BIG PICTURE

While Questrom refashioned his team according to his tried and true playbook, the financial future for retail remained far from certain. In 2003 big chains like J. C. Penney accounted for just 11 percent of the nation's retail sales, down from about 20 percent in 1987. On Wall Street the department-store sector hovered at the bottom of the retail pecking order, with companies such as Federated, Saks, and May Department Stores Company posting month after month of disappointing sales.

For the fiscal year ending January 31, 2004, in its fourth quarter J. C. Penney posted a $1.07 billion loss compared to the profit of $202 million from a year earlier. This led the retailer to agree to sell its Eckerd drug store chain to both Jean Coutu Group and CVS Corporation for $4.525 billion in cash. After counting all the costs, J. C. Penney expected to have received proceeds of about $3.5 billion from the sale. Questrom would continue to search for ways to improve the quality of his company.

See also entries on Barney's, Inc., Federated Department Stores Inc., J. C. Penney Company, Inc., and The Neiman Marcus Group, Inc. in International Directory of Company Histories.