Plano, Texas — J. C. Penney Company, Inc. is implementing a plan to optimize its national retail operations. Under the plan, the company expects to close two distribution facilities and approximately 130 to 140 stores over the next few months.
“In 2016, we achieved our $1 billion EBITDA target and delivered a net profit for the first time since 2010; however, we believe we must take aggressive action to better align our retail operations for sustainable growth. During the year, it became evident the stores that could fully execute the company’s growth initiatives of beauty, home refresh and special sizes generated significantly higher sales, and a more vibrant in-store shopping environment,” says Marvin R. Ellison, chairman and chief executive officer of JCPenney. “We believe the relevance of our brick-and-mortar portfolio will be driven by the implementation of these initiatives consistently to a larger percent of our stores. Therefore, our decision to close stores will allow us to raise the overall brand standard of the company and allocate capital more efficiently.”
“We understand that closing stores will impact the lives of many hard working associates, which is why we have decided to initiate a voluntary early retirement program for approximately 6,000 eligible associates,” adds Ellison.
“We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers,” Ellison continues.
“We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimize the growing operational costs of delivery. In fact, in 2016 approximately 75% of all online orders touched a physical store. Even with a reduced store count, JCPenney is competitively positioned to deliver a differentiated department store model that meets the expectations of a digital world with an inspiring, tangible shopping environment,” Ellison explains.
As a result of the store actions, JCPenney will close a distribution center located in Lakeland, Fla., in early June, at which time operations will transfer to the company’s logistics facility in Atlanta. The company also is in the process of selling its supply chain facility in Buena Park, Calif., in an effort to monetize a lucrative real estate asset.
The total store closures represent approximately 13% to 14 % of the company’s current store portfolio. The stores identified for closure either 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.
The annual cost savings resulting from these strategic decisions, primarily occupancy, payroll, home office support, corporate administration and other store-related expenses, are estimated at approximately $200 million.
The company plans to release a full list of planned closures in mid-March pending notification of all affected personnel. Nearly all impacted stores are expected to close in the second quarter of 2017.
J. C. Penney Company, Inc., one of the nation’s largest apparel and home furnishings retailers, has more than 1,000 store locations across the United States and Puerto Rico. For more information, visit jcp.com.
SOURCE: J. C. Penney Company, Inc.