JC Penney to Close 33 Stores, Cut 2,000 Jobs
JC Penney Co. plans to close 33 stores and eliminate about 2,000 jobs to help save $65 million a year as CEO Mike Ullman tries to turn around the money-losing department-store chain.
The closings and cuts will result in pretax charges of $26 million in the fourth quarter and $17 million in future periods, the Plano, Texas-based company said in a statement.
Mr. Ullman, who returned in April to replace Ron Johnson, has restored promotions, brought back popular private-label brands and reinstated commissions for some salesmen while ending his predecessor's strategy of remodeling the stores into collections of boutiques. The chain has gone nine straight quarters without a profit, and analysts surveyed by Bloomberg are estimating it will post a $207 million loss for the current quarter.
"The closing of 33 stores sounds like not all is well," Paul Swinand, an analyst for Morningstar in Chicago, said today in an interview. "It's also not a massive restructuring."
Many of the stores on the list are in small markets at regional malls that most likely have declining visitors, so the move may boost results, he said.
The closings, which will be completed by early May, represent about 3% of JC Penney's stores, and the job cuts would be about 2% of its workforce.
Of the stores being closed, two are owned by JC Penney, and the remainder are leases, Daphne Avila, a spokeswoman, said. The majority are the chain's smaller formats, she said. These locations, which total about 400, didn't get remodeled under Mr. Johnson with areas for such brands as Joe Fresh and Izod.
The company in November reported its first gain in monthly same-store sales in almost two years amid rising demand for home products, men's apparel and women's accessories.
Last week, Penney reiterated its forecast that same-store sales would improve in the fourth quarter and that it would have more than $2 billion in liquidity at the end of the period. Still, the company failed to provide December sales data it had made public the previous three months. The shares dropped 10% that day and have fallen by more than half since the company announced Mr. Ullman was returning as CEO.
Macy's said last week that it would eliminate about 2,500 jobs and close five stores to help save $100 million a year. The cost reductions entail combining its Midwest and North regions, eliminating some merchandise planning and store positions as well as central office and administrative jobs.