JCPenney closing up to 140 stores, affecting thousands of jobs
- Author: Larry Hoffman Feb 25, 2017,
Feb 25, 2017, 5:44
Though it turned its first profit in years and even outperformed main rivals, digital competition is to blame. In recent months, Sears and Macy's both announced large national store closings, but no Arizona outlets were affected.
JC Penney's plan echoes the announcement by rival Macy's previous year that it would shut about 100 of its stores to adjust to a world where consumers increasingly prefer shopping online to visiting malls. The company said the decision on which stores will close will be announced in the coming weeks.
"We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers", Ellison said.
This year, including the impact of store closings, Penney said it expects to be profitable and post and sales just below or above 2016, or in the range of -1 percent to +1 percent.
The retailer expects to save $200 million in annual costs in connection with the plan but will record an initial pre-tax charge of $225 million to cover the closure costs. Since then, it has focused efforts on its home area, started selling major appliances again and expanded its number of in-store Sephora beauty shops.
Based on the strong performance in its 500 appliance showrooms, JCP will open 100 more in early 2017. It will also test home installation services like HVAC, a move it feels will attract its customers, 70 percent of whom are female and homeowners. And thanks to offerings like buy online, pick up in store, 77 percent of online shoppers also visited a physical store in 2016. This year, it's adding 77 more.
"We believe we must take aggressive action to better align our retail operations for sustainable growth", said Marvin Ellison, the retailer's CEO, in a statement.
J.C. Penney does not break out online sales in its quarterly earnings reports, but Ellison told analysts that online sales grew by double digits both during the quarter ended January 28 and the full fiscal year.
The company said the main criteria for stores to be closed are "either they require significant capital to achieve the company's new brand standard or are minimally cash flow positive today relative to the company's overall consolidated average". Net sales slipped 0.6% to $12.5 billion on the year. Ellison said he was pleased by the double-digit growth of jcpenney.com.