Pinching Penney.
Venerable department store chain declares bankruptcy.
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.
The company has 10 locations in Colorado, all along the Front Range, according to its website. Its store at 5453 W. 88th Ave. in Westminster is the last remaining piece of the now-demolished Westminster Mall.
Penney joins luxury department store chain Neiman Marcus, J.Crew and Stage Stores in filing for bankruptcy reorganization. Plenty of other retailers are expected to follow.
“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 pessimistic 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 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 it will look 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 been reduced to a couple hundred stores after being bought by hedge fund billionaire and former chairman Eddie Lampert in bankruptcy in early 2019. Barneys New York closed its doors earlier this year and Bon-Ton Stores went out of business in 2018.
The pandemic has put department stores further in peril as they see their sales evaporate with extended closures. Even as retailers such as Penney start to reopen in states that have relaxed their lockdowns, they’re also facing Herculean challenges in making shoppers feel comfortable in public spaces.
As Sears’ were, J.C. Penney’s troubles were years in the making, marking a slow decline from its glory days during the 1960s through 1980s, when it became a key shopping destination at malls for families.
The company’s roots began in 1902 when James Cash Penney started a dry good store in Kemmerer, Wyo. The retailer had focused its stores in downtown areas but expanded into suburban shopping malls as they became more popular starting in the 1960s.
But since the late 1990s, Penney struggled with weak sales and heavier competition from discounters and specialty chains that were squeezing its business from both ends. Penney’s began flirting with bankruptcy nearly a decade ago when a disastrous reinvention plan spearheaded by then CEO Ron Johnson caused sales to go into free fall.
Johnson drastically cut promotions and brought in hip brands that turned off loyal shoppers. As a result, sales dropped from $17. 3 billion during the fiscal year that ended in early 2012 to $13 billion a year later. Many longtime customers walked away and have not returned. Johnson was fired in April 2013 after just 17 months on the job.
Since then, Penney’s has undergone a series of management changes, each employing different strategies that failed to revive sales. The company based in Plano, Texas, has suffered five straight years of declining sales, which now hover around $11.2 billion. Its shares are trading at less than 20 cents, down from $1.26 a year ago, and from its all-time peak of $81 in 2006.
Soltau has acted swiftly since joining the company in October 2018. She jettisoned major appliances that were weighing down operating profits. That reversed the strategy of her predecessor, Marvin Ellison, who brought appliances to the showroom floor after a 30-year absence to capitalize on the troubles of ailing Sears.