The "criticism is deserved," Ackman said on Friday of Ron Johnson, the former Apple executive who has been charged with overhauling the staid chain and who has come under fire as the stock price plummeted 27.6 percent in the first quarter.
While Ackman has long been a public cheerleader for Johnson, often saying that he was a doing a great job, he tempered his normally upbeat comments Friday at an investment conference sponsored by Thomson Reuters in Boston.
Speaking bluntly, Ackman, who sits on the JC Penney board and whose $12 billion Pershing Square Capital Management is the company's largest shareholder, said big mistakes have been made in transforming the 110-year-old brand.
JC Penney historically drew customers with big sales and coupons, and Johnson has been criticized for eliminating those in favor of everyday low prices. The approach has alienated the traditional customer base and has yet to resonate with new shoppers.
There was "too much change too quickly without adequate testing," Ackman said, adding that while Johnson faces a tough challenge in fixing the company's cost structure and changing its merchandise, the execution thus far "has been something very close to a disaster."
Ackman has come under scrutiny for investments in retailers in the past, including bets on Target and book seller Borders a few years ago. Pershing Square is sitting on roughly $500 million in paper losses in JC Penney. Still, he said, the retailing business can be lucrative if done right.
"If you get a retailer fixed and you can replicate it, it's about the best way to make money," Ackman said.
In a nod to his commitment to JC Penney's fortunes, the billionaire investment manager wore socks bought at one of its stores.
At the conference, Ackman was asked about other high-profile investments, including nutritional supplements company Herbalife, on which Pershing Square has a $1 billion short bet, expecting that the multilevel marketer's share price will move to zero.
The investment has been the talk of Wall Street in recent months as other well-known hedge fund managers, including Carl Icahn and Daniel Loeb, moved to the other side of the bet with long positions in Herbalife.
"Taking a short position and going public with it is a pretty serious business," Ackman said. "Did I think a group of hedge fund managers would take the other side of the trade and try to orchestrate a short squeeze? No, I didn't think that," Ackman said.
Talking about the public feud over Herbalife, Ackman said that the $2.25 trillion hedge fund industry, once a close-knit one where managers often worked collaboratively, now seems much more competitive.
"This was the first case where there was a lot of sniping going on between managers," he said, referring to the recent backbiting over the Herbalife trade.
But he acknowledged that hedge fund managers can't be overly sensitive. "You have to have thick skin to be in this business."