Ron Johnson out as J.C. Penney CEO, Mike Ullman returns

J.C. Penney Chief Executive Ron Johnson, who tried to replace sales and coupons with everyday low prices, is out after sales plunged 25 percent last year, and the department store chain said it will replace him with his predecessor Mike Ullman.

Shares in J.C. Penney rose nearly 11 percent after the initial CNBC report that Johnson was out, then fell 6 percent after the company said Ullman was back.

Johnson's ouster had been rumored for months, but Ullman's return came as something of a shock, considering how he had been publicly condemned by Penney's largest shareholder, hedge fund manager Bill Ackman.

In a May 2012 presentation, Ackman's Pershing Square called the company "chronically mismanaged" in recent years and took pains to note the stock's declines in Ullman's tenure.

But in a statement Monday, Penney Chairman Thomas Engibous said Ullman was "well-positioned to quickly analyze the situation (Penney) faces and take steps to improve the Company's performance."

Johnson has been under fire as sales plunged 25 percent during the first year of his plan to reinvent the department store chain.

Last week Ackman - who handpicked Johnson to lead the company - said the CEO had made "big mistakes" and that the impact of those mistakes had been "very close to a disaster" for the retailer.

JC Penney traditionally drew in customers with big sales and coupons, but Johnson has been criticized for eliminating those in favor of every day low prices.

The company has now brought back its old pricing strategy to try to bring shoppers back. Executives have acknowledged their first challenge is to get the chain's old customers back into stores.

"The lack of testing did him in," analyst Walter Loeb said of Johnson.