J.C. Penney to Shut as Many as 140 Stores as Industry SlumpsBy
Closings and job cuts are expected to save $200 million a year
Announcement echoes rival Macy’s plan to trim 100 locations
J.C. Penney Co. plans to shutter as many as 140 stores and trim thousands of jobs, becoming the latest department-store chain to make big moves in a world of lower mall traffic and fierce online competition.
The closings represent as much as 14 percent of the company’s store base and less than 5 percent of total sales, J.C. Penney said Friday. The moves, which also include shutting two distribution centers, will save about $200 million a year.
J.C. Penney’s plan echoes rival Macy’s Inc.’s announcement last year that it would shut about 100 of its stores to adjust to a world where consumers increasingly prefer shopping online to visiting malls. Sales at J.C. Penney, which is still working to recover from a disastrous attempted reinvention, are less than half of their 2002 peak.
“We must take aggressive action to better align our retail operations for sustainable growth,” Chief Executive Officer Marvin Ellison said in a statement.
The stores will close in the second quarter, and the company will take a charge of about $225 million related to the moves in the first half of this year. The 6,000 job cuts will come through a voluntary early retirement plan, and more workers are expected to take that offer than will be affected by the shutdowns, the company said.
The shares fell as much as 9.8 percent to $6.19 in New York. The stock already had been down 17 percent this year through Thursday’s close.
Ellison has been working to attract customers by expanding the retailer’s partnership with Sephora and increasing its assortment of big-ticket items, such as appliances. The Plano, Texas-based company also is investing in services like salons that consumers can’t get online.
The strategy had shown some success. J.C. Penney posted its first profit since 2011 in the fiscal year that just ended in January, with net income of $1 million. Earnings excluding some items were 64 cents a share last quarter, the company said Friday, topping analysts’ 61-cent average estimate.
Still, the outlook is rocky. The company forecast that same-store sales in the current year will range from a 1 percent decline to a 1 percent gain. Adjusted earnings will be 40 cents to 65 cents a share, while analysts estimate 54 cents.
“We learned a lot of lessons in 2016, we made some mistakes but we learned,” Ellison said on a conference call. “We are confident because of that, the growth initiatives we’ve laid out will continue to bear fruit for us for 2017.”