PLANO (CBSDFW.COM/AP) — J.C. Penney says it will be closing anywhere from 130 to 140 stores as well as two distribution centers over the next several months as it aims to improve profitability in the era of online shopping.
The closures represent about 13 percent to 14 percent of the department store operator’s current store count, and less than 5 percent of total annual sales. The company said that it would also initiate a voluntary early retirement program for about 6,000 eligible employees.
The news came as Penney reported a fiscal fourth-quarter net income of $192 million.
“It’s very unfortunate, because we do shop here quite a bit,” said customer Dianne Villegas in a J.C. Penney parking lot in Dallas.
The Plano-based chain posted a profit in the fourth-quarter compared to a loss a year ago. But total sales were down slightly, and a key revenue metric declined slightly as well. Before Thanksgiving last year the company wrestled with sluggish sales and reported a third-quarter loss.
Penney is trying to recover from a catastrophic reinvention plan under former CEO Ron Johnson that sent sales and profits into a free-fall in 2012 and 2013. Business stabilized under Mike Ullman, who took the helm in 2013 after Johnson was pushed out. Under Marvin Ellison, who has been CEO since 2015, Penney is looking for new ways to increase sales while playing catch up in e-commerce.
Like other department stores, J.C. Penney is trying to adjust to changing shopping patterns, and is joining other department stores like Macy’s, which are shrinking their store footprint. Consumers are shifting their spending away from clothing and toward experiences like beauty treatments or toward furnishing their home. And when they do pick up clothing, it’s more often at off-price stores or online as Amazon moves more into apparel.
The news about the closures didn’t come as a surprise for some who said they’d seen a shift in selection at the store. “It just doesn’t seem like they are really the caliber and the quality that they used to be, when I used to shop here,” said shopper Mandy Montane.
“Locally it’s a big impact on the people who will lose their jobs,” said Mike Davis, who teaches business strategy at SMU’s Cox School of Business. “But globally, no impact at all, because this retailing is just going somewhere else. For jobs being lost here, there are jobs being picked up at a Wal Mart, a Best Buy, or an Amazon.”
Penney’s results capped a week of weak fourth-quarter results from a string of department stores. Kohl’s Corp. reported Wednesday a drop in fiscal fourth-quarter profit as total sales declined. Revenue at stores opened at least a year dropped 2.2 percent in the quarter. Nordstrom Inc., the department store recently scolded by President Donald Trump, reported late Wednesday a better-than-expected quarterly profit with help from strong sales online and at Nordstrom Rack. But at the Nordstrom brand, comparable store sales decreased 2.7 percent. Macy’s, the nation’s largest department store chain, says its earnings for the quarter that includes the holiday period dropped nearly 13 percent as results were dragged down by lower sales, store closures and other costs.
Given the environment, Penney wants to be less dependent on clothing, and is focusing its efforts on its home area and rolling out major appliances in it stores. It has expanded the Sephora beauty shops and is updating its beauty salons, now branded Salon by InStyle. It is also beefing up its store label brands like St. John’s Bay. In the fourth quarter, top performing areas included home, Sephora, its salon business and fine jewelry.
The company is aiming to be more competitive in the digital arena. Penney is arming its store associates with mobile devices to help check out online shoppers who are picking up orders in the store.
For the fiscal fourth quarter, J.C. Penney reported net income of $192 million, or 61 cents per share. Earnings, adjusted for one-time gains and costs, came to 64 cents per share.
So far there’s no word on how many stores, if any, in Texas will be closed. The company is expected to release the list of closure locations next month.
(© Copyright 2017 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)