J.C. Penney files for bankruptcy
NEW YORK — The coronavirus pandemic has pushed the storied but troubled department store chain J.C. Penney into Chapter 11 bankruptcy. It is the fourth major retailer to meet that fate.
As part of its reorganization, the 118-year-old company said late Friday it will be shuttering some stores. It said the stores will close in phases throughout the Chapter 11 process and details of the first phase will be disclosed in the coming weeks.
Penney is the biggest retailer to file for bankruptcy reorganization since the pandemic and joins luxury department store chain Neiman Marcus, J.Crew and Stage Stores. Plenty of other retailers are expected to follow as business shutdowns across the country have evaporated sales. In fact, U.S. retail sales tumbled by a record 16.4% from March to April.
“The coronavirus pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country,” said Penney’s CEO Jill Soltau in a statement. “As a result, the American retail industry has experienced a profoundly different new reality, requiring J.C. Penney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company. “
Many experts are skeptical about Penney’s survival even as it sheds its debt and shrinks the number of its stores. Its fashion and home offerings haven’t stood out for years. And moreover, its middle-to-low income customers have been the hardest hit by massive layoffs during the pandemic. Many of them will likely shop more at discounters — if they shop at all, analysts say.
“This is a long, sad story,” said Ken Perkins, president of Retail Metrics, a retail research firm. “Penney offers no reason to shop there compared to its competitors, whether it’s Macy’s or T.J. Maxx or Walmart. How are they going to survive?”
Penney said that it has $500 million in cash on hand and has received commitments of $900
million in financing to help it operate during the restructuring. It said that it will be looking at different options, including the sale of the company. The restructuring should reduce several billion dollars of its debt and provide more flexibility to navigate the financial fallout from the pandemic, Penney said.
Like many department stores, Penney is struggling to remain relevant in an era when Americans are buying more online or from discounters.
Sears has now been reduced to a couple hundred stores after being bought by hedge fund billionaire and its former chairman Eddie Lampert in bankruptcy in early 2019.