Between the shift towards online retailers and a dismal shopping season, J. C. Penney closed 33 stores costing 2,000 people their jobs. In an attempt to regain business they adapted their strategy, but the changes were not enough to sustain their profitability. They hope that with these changes they will be able to position J.C. Penney for future success.
By ELIZABETH A. HARRISJAN. 15, 2014
In yet another sign of its deep slump, J. C. Penney Company said on Wednesday that it would close 33 stores across the country and shed about 2,000 jobs.The company said in a statement that the closings and resulting job cuts would save about $65 million a year.One of the oldest retailers in the nation, J. C. Penney has undergone considerable management and investment turmoil in the last few years. It fired one chief executive, Ron Johnson, and then brought back his predecessor, Myron E. Ullman III. It tried a new retail strategy, which alienated core customers, and reverted to its old strategy. Its stock has plummeted nearly 80 percent in the last two years.
In Wednesday’s announcement, Penney said it was closing “underperforming” stores. But some analysts and industry experts said that with 1,100 locations and such extensive difficulties, shedding 33 stores would not be enough to move the needle on the company’s performance.
“The hole is too deep,” said Burt P. Flickinger III, managing director at the Strategic Resource Group, a consumer industry consulting company that specializes in retailing. “This is a warning shot across the bow to landlords to try to provide accommodations or concessions, like on common area maintenance charges or lease reductions.”
The news comes on the heels of what appears to have been a disappointing shopping season for many major retailers.
Several have already lowered their profit forecasts and reported holiday-season sales that were either fairly static or represented slight growth over the previous year. Just last week, Sears Holdings, another retailer that has been struggling for years, released terrible holiday results, saying that sales at it Sears stores in the United States dropped 9.2 percent during the holiday shopping season compared with the same period the previous year.
Penney released a two-paragraph statement last week saying it was “pleased” with its performance, but little else, sending its stock down on the assumption that it was keeping quiet because sales reports were dismal.
In a note to vendors on Wednesday, Mr. Ullman elaborated slightly. He said that “the holiday season was certainly an interesting one, with a compressed calendar, winter snowstorms and challenging mall traffic.” Despite that, the company emerged “in good shape,” he said, and sales at its website, jcp.com, “continued to be robust.”
Some industry watchers were not convinced.
“It must have been a train wreck under the Christmas tree,” Mr. Flickinger said, citing a lack of concrete information and a difficult season for retailers over all.
The announcement of store closings and the heightened expectations for a difficult holiday season may cast a shadow over some investor optimism in November, when the company announced its third-quarter earnings. Though the losses were bigger than expected — it reported an adjusted net loss of $457 million for the three months that ended Nov. 2 — its online sales rose 24.5 percent during that period.
And sales at stores open for at least a year rose just under 1 percent in October, the first such rise in nearly two years.
Despite the closings, which the company said should be completed by early May, Penney said it still intended to open a new store in Brooklyn.
“As we continue to progress toward long-term profitable growth, it is necessary to re-examine the financial performance of our store portfolio and adjust our national footprint accordingly,” Mr. Ullman said Wednesday in a statement. “While it’s always difficult to make a business decision that impacts our valued customers and associates, this important step addresses a strategic priority to improve the profitability of our stores and position J. C. Penney for future success.”
By closing stores, Penney said it expected to incur estimated pretax charges of about $26 million in the fourth quarter of its 2013 fiscal year and about $17 million in future periods.
Penney is not the only retailer to announce store closings recently. Last week, Macy’s said it would close five stores and layoff about 2,500 employees. But the retailer also said it would open eight new Macy’s or Bloomingdale’s locations, and with new positions being added in areas like its online operations, it expected its work force to stay roughly level.
That same day, Macy’s announced that in stores open at least a year and online at Macy’s and Bloomingdale’s websites, its holiday sales grew 3.6 percent in November and December over the same period the year before.
Sears Canada, which still operates a catalog sales operation in addition to 181 department stores, said on Wednesday that it would eliminate 1,628 jobs. Most of the loss, 1,345 positions, will come from outsourcing its three call centers to IBM over the next nine months. And 283 people were let go immediately in what the company described as a “reorganization and simplification of its logistics organization.”
Sears Canada laid off a similar number of workers last year and will be left with about 20,000 employees after the latest reduction.
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