Department store operator JC Penny to close stores, cut 2,000 jobs
16 Jan 2014
Struggling department store operator JC Penney Co Inc plans to close 33 stores by early May as the chain tried to return to profitability.
The chain would also cut 2,000 jobs, all related to the closings, of its workforce of 116,000 and over 1,100 stores.
The news gives rise to speculation that Penney's holiday season sales did not measure up to the expectations and that the chain needed to do even more to recover from a turnaround plan that had had disastrous results.
Penney's, which earlier this month said it was pleased with its holiday results declined to give sales figures, which left Wall Street analysts speculating about how the season actually fared.
Virginia's Timesdispatch.com quoted Brian Sozzi, CEO and chief equities strategist Belus Capital Advisors, as saying it was a season where they realised that they had to do more to connect with the customers they had lost.
The closings and cuts would result in pretax charges of $26 million in the fourth quarter and $17 million in future periods, according to the Plano, Texas-based company's statement yesterday.
Chief executive officer, Mike Ullman, who returned in April replacing Ron Johnson, has restored promotions, brought back popular private-label brands and reinstated commissions for some salesmen even as he ended his predecessor's strategy which saw the stores turned into collections of boutiques.
The chain has gone nine straight quarters without a profit, and according to analysts polled by Bloomberg, it would post a $207 million loss for the current quarter.
Morningstar analyst Paul Swinand told Bloomberg that the closing of 33 stores sounded as though not all was well. He added, it was also not a massive restructuring.
He added many of the stores on the list were in small markets at regional malls that most likely had declining visitors, so their shuttering might boost results.
The closings, which would be completed by early May, represent about 3 per cent of JC Penney's stores, and the job cuts would be about 2 per cent of its workforce.
