Northwest Arkansas Democrat-Gazette
Store closings
J.C. Penney to shutter more sites after weak holiday sales season.
NEW YORK — J.C. Penney is closing more stores after a weak holiday sales season for the retailer, the department store said Thursday.
Net income tumbled nearly 70 percent and a key measure for health dropped 4 percent in the fourth-quarter, the most crucial period of the year for retailers who bank on strong holiday sales.
The company said it would turn the lights out at 18 department stores, including three that were announced in January. It also will close nine home and furniture stores. It will take charges of $15 million in relation to those closings during the first half of this year.
The company did not specify which stores will close. It has 14 stores in Arkansas, according to the company website.
The company did top expectations for the fourthquarter results and, under new Chief Executive Officer Jill Soltau, the department store rid itself of unprofitable inventory and said it will have positive free cash flow this year.
Shares jumped 22 percent to $1.52 Thursday. Before the economic crisis hit a decade ago, shares cost about $70.
J.C. Penney posted net income of $75 million, or 24 cents per share, for the quarter. That compares with $242 million, or 77 cents per share, a year ago.
Adjusted net income was $57 million, or 18 cents per share, 7 cents better than analyst had projected, according
to a survey by FactSet. Revenue including credit income fell more than 8 percent to $3.78 billion, but that was also better than expected.
Even though profit and sales fell, investors were elated that it wasn’t worse.
Soltau, who came on board in October, faces numerous challenges in avoiding the fate of Sears or other retailers that have filed for bankruptcy protection, or vanished.
Under Soltau, J.C. Penney jettisoned major appliances, which accounted for 2.7 percent of the company’s sales last year but dragged on the company’s operating profit.
It’s focusing instead on women’s clothing, and goods for the home like towels and bedsheets, which carry higher profit margins. Furniture is still available, but only online.
That reverses the course followed by predecessor Marvin Ellison, who three years ago began selling major appliances again in an attempt to capitalize on problems at Sears.
In a conference call Thursday, Soltau said she has spent time with customers, suppliers and workers and she said she’s convinced that the company can establish a path of “sustainable profit growth.”
Changes will be swift, methodical and based on what customers want and expect from J.C. Penney, Soltau said. “This is not business-as-usual,” she said during a conference call Thursday. “Our current reality is clear.”
The emphasis on women’s clothing, while unquestionably important for the department store, isn’t particularly innovative, according to Bob Phibbs, the CEO of Retail Doctor, a New York consulting firm. At the same time, the company’s exit from selling appliances has left less room to maneuver.
“It’s not a bold strategy,” Phibbs said. “That’s what department stores do: They do apparel. If you don’t do apparel what are you going to do? Tools? They’re not doing appliances, they’re not doing lawn and garden, and they’re cutting back on furniture. So there’s even less shoppable categories to get people in with.”
Department stores like J.C. Penney are trying to reinvent themselves in an era when Americans are buying more online, or turning to discounters like T.J. Maxx for clothing.
Drawing shoppers back has proved exceedingly difficult, even for long-standing brands.
Momentum appears to be slowing at Macy’s, which released fourth-quarter results this week. It reported weaker profit and total sales, as well as meager growth in sales at established stores, a key measure for a retailer’s health.
Nordstrom was to post earnings late Thursday and Kohl’s reports next week.
Among the four stores, only Kohl’s has seen its stock move higher over the past 12 months, but just barely. Shares of Sears and J.C. Penney are down more than 60 percent from the past year.
And the path back to prosperity appears especially tenuous for J.C. Penney. It is trying to claw its way back after a disastrous reinvention plan in 2012 by its former CEO Ron Johnson, who dramatically cut back on promotions and brought in new brands to attract young shoppers.
Sales at J.C. Penney went into a free fall. It suffered major losses and once-loyal customers moved on.
That situation has stabilized, but establishing an identity in a retail landscape that has undergone seismic changes continues to elude J.C. Penney.
“The central problem for [J.C. Penney] is that it no longer gives shoppers reasons to visit stores and to make purchases,” said Neil Saunders, managing director of GlobalData Retail. “In other words, it has lost sight of why it exists. This is evident across both stores and online where a hodgepodge of products are thrown together in a seemingly random fashion.”
The company reduced inventory by 13 percent last year and that will continue throughout 2019. Soltau said more uncluttered stores will allow people to find what they want more easily.
New executive hires were also announced Thursday, including chief merchant, the person who decides what goes on store shelves.
Saunders lauded Soltau’s leadership so far, saying J.C. Penney’s travails predate her. But he said time is limited.