J.C. Penney to Close 75 Stores, Trim 4,900 Jobs
J.C. Penney Co., hurt by a weak holiday season, said Tuesday that it will close about 6% of its stores, eliminate 4,900 jobs and improve its clothing selection in a bid to rejuvenate its business.
The Plano, Texas-based retailer said only six of the 75 stores to be closed have been identified. Of the jobs to be eliminated--2% of Penney’s total--about 3,200 are positions at stores scheduled to be closed. The remaining 1,700 jobs are management positions.
Analysts said Penney is likely to close some of its 92 California stores because the chain is not doing well here. Penney said the recent closure of its store in Santa Monica is not part of the plans discussed in the announcement.
Penney plans to expand its private-label clothing lines, which account for 45% of its apparel sales, and to eliminate poor-selling lines.
“Penney’s problems are the same across the country,” said New Jersey-based retail economist Kurt Barnard. “The company’s not keeping up with changing lifestyles, and they’re not keeping up with their primary competitors. Sears, for example, is eating their lunch.”
Whereas Sears, Roebuck & Co. has redesigned its stores--creating more space and more attractive signs to highlight hot clothing styles--Penney’s stores are unattractive and cluttered with excess selection, Barnard said.
“Penney has too much variety in their apparel lines,” said Ed Weller, a San Francisco-based retail consultant. “They’re trying to narrow and simplify their offering to get consumers to focus on certain core brands.”
The announcement of cuts comes in the wake of a disappointing holiday season. Penney’s same-store sales--revenue from stores open at least 12 months--declined 2.3% in December. In contrast, retail sales industrywide for December rose about 5%.
While apparel sales were weak overall, Penney performed more poorly than its competitors. Analysts said the decline is a sign that many consumers do not consider Penney’s apparel a good value. The company had forecast a 2% increase for December.
“Penney hasn’t been able to get a good share of apparel sales--that’s the problem,” Weller said. “Gap Inc. was able to generate strong sales and May [Co.] department stores did well in this environment.”
Penney said the job costs and store closings will result in fourth-quarter pretax charges of $225 million. The streamlining will cut costs by $50 million this year and by $105 million in 1999, the company said. The company operates 1,200 stores.
“We have to identify unproductive assets to remain effective,” said Penney spokeswoman Stephanie Brown. “We have to change the way we do business. The old processes were too complicated and expensive. . . . We have to be more streamlined, productive and more focused.”
The retailer has high hopes for its St. John’s Bay denim wear and its Hunt Club line of sportswear for women, which was reintroduced in mid-1996. It plans to improve its brand-name selections with Liz Claiborne’s Crazy Horse label, exclusive to Penney.
Penney also is expected to revamp its mix of home furnishings, analysts said, although the retailer has not yet announced specific changes. Penney’s home furnishings sales have slumped, while sales of such items have soared at chains such as Kmart, Sears, Target and Mervyn’s.
“These merchandising changes should begin to pay off by the second half of the year,” said analyst Walter Loeb of New York-based Loeb Associates.
Wall Street was somewhat encouraged by the announced changes. J.C. Penney shares rose $1.31 to $62.81 on the New York Stock Exchange.
Penney said it will announce future closings 60 to 90 days before each store is to be closed. The first six stores to be closed are in Babylon, N.Y.; Beloit, Wis.; Kewanee, Ill.; Bay City, Texas; West St. Paul, Minn.; and St. Helens, Ore.
