J.C. Penney will shutter more than 130 stores
J.C. Penney is joining its department store rivals in pruning its store numbers in an era of online shopping.
Penney said Friday it will close 130 to 140 stores as well as two distribution centers over the next several months as it tries to improve profitability. The company said it also would initiate a voluntary early retirement program for about 6,000 eligible employees.
The news came as Penney posted a profit for the fourth quarter, compared to a loss a year ago. But total sales were down slightly, and a key revenue metric declined a bit as well. The company issued a conservative annual forecast, sending shares down 9 percent on Friday.
Penney’s announcement also devalued the Chattanooga-based CBL & Associates Properties, which operates shopping malls across the country and is a landlord for some J.C Penney stores.
According to Bloomberg, CBL investor relations claims it has just one store that’s impacted and the company has already been working on redevelopment plans. But shares of CBL still fell nearly 3.9 perent, or 40 cents per share, to close Friday at $9.97 per share — the lowest since last July.
J.C. Penney previously closed its anchor store at Northgate Mall in Hixson in 2014 and shuttered its anchor store in the Walnut Square Mall in Dalton, Ga., the following year. Penney’s continues to operate stores at Hamilton Place mall in Chattanooga and the Bradley Square Mall in Cleveland.
J.C. Penney CEO Marvin Ellison acknowledged that Penney wasn’t strategic with promotions last year, which hurt profit margins, and said that its level of couponing was “unhealthy.” It plans to use a more data-driven approach to pricing this year after testing the strategy in some categories last year.
Like other department stores, J.C. Penney is trying to adjust to changing shopping patterns. But it is also still recovering from a catastrophic reinvention plan under a former CEO that sent sales and profits freefalling
starting in 2012. Since then, it has focused efforts on its home area, started selling major appliances again and expanded its number of in-store Sephora beauty shops.
While its annual sales still shrunk, what’s encouraging is Penney’s profit picture. Penney was able to pull in a $1 million profit for the full fiscal year, the first time it earned an annual profit since 2010. The stores it is closing represent about 13 percent to 14 percent of its current store count of about 1,000, but less than 5 percent of total annual sales.
“With a slimmed-down store portfolio, [J.C. Penney] will be able to focus on making its remaining stores more of a destination,” said Neil Saunders, managing director of GlobalData Retail. “This is essential, as while progress has been made on categories like home, other departments still require attention.”
Penney managed to outperform some of its rivals. Kohl’s Corp. reported a drop in fiscal
fourth-quarter profit as total sales declined. Revenue at stores opened at least a year dropped 2.2 percent. Nordstrom Inc. reported a better-than-expected quarterly profit with help from strong sales online and at Nordstrom Rack. But at the Nordstrom brand, comparable store sales decreased 2.7 percent. Macy’s, the nation’s largest department store chain, says its earnings for the quarter that includes the holiday period dropped nearly 13 percent, hurt by lower sales, store closures and other costs.
Given the environment, Penney wants to be less dependent on clothing. It’s rolled out major appliances in 500 stores and plans to add 100 more appliance showrooms this year. It has updated its beauty salons, now branded Salon by InStyle. It also is beefing up its store label brands such as St. John’s Bay. In the fourth quarter, top-performing areas included home, Sephora, its salon business and fine jewelry. Last year, it added 61 Sephora stores for a total of 577. This year, it’s adding 77 more.