J.C. Penney to close nearly 30% of stores

Move part of plan to streamline operations after filing for bankruptcy

J.C. Penney Co. plans to permanently close more than 240 department stores, or nearly 30% of its locations, as the retailer tries to streamline its business under chapter 11 bankruptcy protection.

The 118-year-old company filed for bankruptcy on Friday, becoming the biggest retailer to seek court protection during the coronavirus pandemic. Neiman Marcus Group Inc., J.Crew Group Inc. and Stage Stores Inc. have all filed for bankruptcy this month.

Penney said in a securities filing Monday that it plans to shrink its fleet from 846 locations to 604 by next year.

It also plans to close two distribution centers, reduce corporate overhead by 25% and cut $1 billion (U.S.) in expenses. It is considering splitting the company into an operating entity and real-estate investment trust, which would allow it to sell some stores and lease them back.

The company declined to disclose the list of locations that will permanently shut or how many jobs will be lost. Penney had about 90,000 full-time and part-time employees as of Feb. 1, though it has furloughed many after closing its stores in March.

It began reopening some locations this month and plans to reopen another 115 on Wednesday.

The company said it wants to supercharge its e-commerce operations, which it plans to grow to $2.3 billion in annual sales by 2024, up from $1.5 billion last year.

In its business plan, Penney said it has a strong brand but has suffered in recent years from confusing pricing, outdated marketing and a poor e-commerce experience for customers. It said it has taken steps to address some issues by reducing inventory and improving its digital presentation.

J.C. Penney Co. plans to shrink its fleet from 846 locations to 604 by next year

The company said those actions helped it to improve sales in certain categories such as activewear and women’s work clothes and to expand margins last year. But the pandemic, which forced Penney to temporarily close all of its stores, created “unprecedented disruptions” to its business.

“The go-forward business will be a smaller but stronger, more effective, and more profitable enterprise,” the company said.

Penney’s sales, which totaled $10.7 billion in the most recent fiscal year, have fallen every year since 2015, and it hasn’t made an annual profit in nearly a decade.

Its troubles date to 2011, when it hired former Apple Inc. executive Ron Johnson, who eliminated discounts in favor of everyday low prices and dropped popular in-house brands. Shoppers bolted.

By the end of 2012, sales had fallen to $12.99 billion from $17.26 billion a year earlier.