Department stores

J.C. Penney: The reality show

August 19, 2013: 9:05 PM ET

Thanks to a motley cast of characters, the department store has somehow become a real-time tableau for virtually everything that's wrong with American business.

By Jennifer Reingold, senior editor

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FORTUNE -- You've seen them on Big Brother, The Real Housewives, and The Bachelorette: the walking disasters and oversimplified personas that make a show both repellent and fascinating at the same time. And now you see them in the last place you'd expect -- at the lurid reality show that is J.C. Penney (JCP). Thanks to a motley cast of characters, the $13-billion-in sales middle-brow department store has become a real-time tableau for virtually everything that's wrong with American business.

On Tuesday at 8:30 a.m. EDT, the company will release its second-quarter 2013 earnings numbers. Although hotly anticipated by every business journalist, hedgie, and retailer out there, it doesn't much matter, whether they are outrageously disappointing or not quite as disappointing as anticipated (decent earnings are not an option); JCP is in deep trouble and everyone knows it. (Update: It missed bleak expectations.)

More significant is how a few colorful characters took a 111-year old company whose name was once a virtual synonym for boring and turned it into the kind of train wreck you simply can't stop watching.

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Here, then, in the spirit of it being better to laugh than cry, is a handy guide to the main characters in the tragedy that is J.C. Penney.

The Know-It-All: Bill Ackman

Ackman, the always-confident head of Pershing Square Capital Management, started this whole enchilada when he, along with real estate executive Steven Roth, bought more than a third of the sleepy company in 2011 and pressured the board to replace CEO Mike Ullman with Ron Johnson, the brain behind Apple's (AAPL) retail effort. When Johnson didn't deliver the results he had promised, Ackman canned him, then -- later -- started a nasty public fight with the board, impugned their qualifications and -- on August 13 -- stepped down, some $700 million in the hole. It can't feel good that some of his rivals, like George Soros, have bought in at close to JCP's low, seemingly as much to taunt Ackman as anything else.

The Disruptor: Ron Johnson

What's more exciting than a fearless leader who damns the torpedoes? Forget about things like focus groups and surveys; Johnson, who started Apple's retail arm under another famous disruptor, Steve Jobs, claimed to know exactly what the customer wanted: the end of sales and discounts.

Except that they didn't.

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Sales dropped an astonishing 25% in a year. Although Johnson hoped to remake J.C. Penney as an exciting destination -- "America's favorite store," with a town square in the middle of a strip mall -- plummeting sales got him canned in April, just as some of his new products and formats were finally rolling out. At least no one can ever accuse Johnson of being an empty suit.

The Celebrity: Martha Stewart

Where Martha goes, drama follows. This maxim held true yet again when she signed an agreement to sell 16.6% of her company to J.C. Penney and produce a new line of housewares for the company. There was one major problem, however: Macy's (M), which sold her current line, wasn't amused. The lawsuit that followed -- which is still unresolved -- slowed Penney's momentum at a critical time and left shelves empty. What's more, Martha Stewart Living Omnimedia (MSO) continues to suffer, with its stock down 40% since the Penney deal was announced, creating a double whammy for JCP and its investment. Martha, however, continues to get paid for her products, whether or not they sell.

The Phoenix: Myron "Mike" Ullman

Until 2011, Ullman was regarded as a decent, if not scintillating, retail executive. J.C. Penney made money, but no one thought of the company as anything but dowdy. When Ackman blew into town, he set his sights on Ullman, who first planned to stay on as chairman, then changed his mind (encouraged, of course, by a hefty severance package). Just 17 months later, he was back; in April 2013, the board ousted Johnson and reinstated Ullman, who was supposed to be a temporary salve but has managed to stay in charge after yet another attack from Ackman, in August 2013. He's the Susan Lucci of retail executives.

The Greek Chorus: J.C. Penney's Board of Directors

Chaired by former Texas Instruments CEO Thomas Engibous, the 11-member board acted collectively like a small, scared kitten when Ackman and Steven Roth, CEO of Vornado, bought in and agitated for change, starting with the hiring of Johnson. Said one director, smiling nervously at the time of Johnson's star-studded relaunch of the company in early 2012: "He [Ackman] seems like a smart young man. I sure hope this works out."

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It didn't. Or, at least, it hadn't when the board reversed course, canning Johnson after Ackman lost faith and Roth abruptly sold his stake in the spring of 2013. Only in August 2013, when Ackman publicly dissed the board and called for yet another CEO, did the directors finally decide they'd had enough. They figured it was better to have him sell his stake than to remain part of the company's leadership. But the damage was done.

J.C. Penney's survival is now officially in question, with the stock trading at about $13, down from its 2012 high in the low 40s. What would The Situation say?

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