JC Penney Q4 Profit Beats View; To Close Up To 140 Stores
- Author: Larry Hoffman Feb 25, 2017,
Feb 25, 2017, 5:10
-After sluggish holiday-season sales, J.C. Penney announced on Friday its plan to shutter up to 140 stores - the latest department store chain facing pressure to reorganize its business model from online retailers and shifting consumer-shopping habits.
The company did not announce a store closure list, saying the locations will be released in mid-March.
JCPenney will also close two distribution centers.
Ellison said the company's plan to shutter doors coincides with its early retirement program, which will open up 6,000 jobs that displaced employees could fill. Chief financial officer Edward Record said those stores account for less than 5% of J.C. Penney's total sales.
The company said it would also initiate a voluntary early retirement program for about 6,000 eligible employees and close two distribution facilities.
Net sales of $12.547 billion, down 0.6% from $12.625 billion previous year.
"While many pure play e-commerce companies are experiencing dramatically increasing fulfillment costs, we are pleased with the double digit growth of jcpenney.com and how leveraging our brick and mortar locations is enabling us to offset the last-mile delivery cost".
The retailer expects to save roughly $200 million a year by closing these stores.
Yet unlike other retailers, J.C. Penney also delivered a net profit in 2016, the first time since 2010, of $1 million.
Sales at Penney's stores which have been open for more than a year fell 0.7 percent in the fourth quarter which ended January 28, a bigger drop than the 0.5 percent decrease analysts predicted. It expects sales at existing stores will be between -1% and 1%. But since then, rivals like Macy's (m) and Sears (sold) have closed hundreds of stores, something that will decimate traffic at malls the three chains co-anchor.
"Maintaining a large store base gives us a competitive advantage in the evolving retail landscape", he added.
Like other department stores, J.C. Penney is trying to adjust to changing shopping patterns.
The company said closing weak-performing stores would better allow the company to compete by increasing efficiency and allow them to better focus on online growth.
Adjusted earnings per share for the quarter were $0.64, compared to $0.39 per share in the year-ago period.