J.C. Penney to Close Up to 140 Stores

JCPenney_Brooklyn

PLANO, TX The woes of retail continue.

The J. C. Penney Company is looking to close stores in a bid to return to profitablity. Under an announced restructuring plan, the Company expects to close two distribution facilities and approximately 130 – 140 stores over the next few months. J.C. Penney is also offering early retirement to 6,000 workers. These strategic decisions will help align the Company’s brick-and-mortar presence with its e-commerce network, thereby redirecting capital resources to invest in locations and initiatives that offer the greatest revenue potential.

J.C. Penney reported net sales of $4.0 billion in the fourth quarter of 2016, down slightly at 0.7% from a year ago. Home, Sephora, Salon and Fine Jewelry were the Company’s top performing merchandise divisions during the quarter. Geographically, the Southeast and Pacific were the best performing regions of the country.

For the full year 2016, J.C. Penney reported net sales of $12.5 billion compared to $12.6 billion in 2015, a (0.6) % decrease. Comparable store sales were flat for the year.

“In 2016, we achieved our $1 billion EBITDA target and delivered a net profit for the first time since 2010; however, we believe we must take aggressive action to better align our retail operations for sustainable growth. During the year, it became evident the stores that could fully execute the Company’s growth initiatives of beauty, home refresh and special sizes generated significantly higher sales, and a more vibrant in-store shopping environment,” said Marvin Ellison, chairman and chief executive officer of JCPenney. “We believe the relevance of our brick and mortar portfolio will be driven by the implementation of these initiatives consistently to a larger percent of our stores. Therefore, our decision to close stores will allow us to raise the overall brand standard of the Company and allocate capital more efficiently.”

“We understand that closing stores will impact the lives of many hard working associates, which is why we have decided to initiate a voluntary early retirement program for approximately 6,000 eligible associates. By coordinating the timing of these two events, we can expect to see a net increase in hiring as the number of full-time associates expected to take advantage of the early retirement incentive will far exceed the number of full-time positions affected by the store closures,” added Ellison.

“We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers. Maintaining a large store base gives us a competitive advantage in the evolving retail landscape since our physical stores are a destination for personalized beauty offerings, a broad array of special sizes, affordable private brands and quality home goods and services. It is essential to retain those locations that present the best expression of the JCPenney brand and function as a seamless extension of the omnichannel experience through online order fulfillment, same-day pick up, exchanges and returns,” said Ellison.

“While many pure play e-commerce companies are experiencing dramatically increasing fulfillment costs, we are pleased with the double digit growth of jcpenney.com and how leveraging our brick and mortar locations is enabling us to offset the last-mile delivery cost. We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimize the growing operational costs of delivery. In fact, in 2016 approximately 75% of all online orders touched a physical store. Even with a reduced store count, JCPenney is competitively positioned to deliver a differentiated department store model that meets the expectations of a digital world with an inspiring, tangible shopping environment,” Ellison added.

As a result of the store actions, JCPenney will close a distribution center located in Lakeland, Fla. in early June, at which time operations will transfer to the Company’s logistics facility in Atlanta as part of a strategic effort to streamline store support services. The Company also is in the process of selling its supply chain facility in Buena Park, CA in an effort to capitalize on a lucrative real estate asset.

Associates who will be impacted by the store and distribution center closures will receive separation benefits, which includes assistance identifying other employment opportunities and outplacement services such as resume writing and interview preparation.

Eligibility for the Voluntary Early Retirement Program (VERP) will generally include home office, stores and supply chain personnel who met certain criteria related to age and years of service as of Jan. 31. Approximately 6,000 associates are eligible for the program. Current costs and future savings will be based on the number of associates who accept on or before March 17 when the consideration period expires.