JC Penney Closing Nearly 150 Stores
By Eric G Braun, Senior Writer, USRW
The retail world dropped another economic bomb on the country, and our industry, with the announcement from the JC Penney Corporation that it plans on closing close to 150 underperforming stores.
The Company expects to close two distribution facilities and approximately 130 - 140 stores over the next few months.
Penney CEO Marvin R. Ellison, said “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. By coordinating the timing of these two events, we can expect to see a net increase in hiring as the number of full-time associates expected to take advantage of the early retirement incentive will far exceed the number of full-time positions affected by the store closures," added Ellison.
Penney’s closed 33 stores in 2014 and 40 in 2015.
Penney’s in its heyday was a staple of mid income families, and a part of most American households in the 1970’s and 80’s. Penney also owned Thrift Drug Stores, a dying brand in the 90’s, so the company bought Eckerd Drugs in 1996 and kept the Eckerd name, a more popular and modernized drug store. On top of that, the company also bought the 141-store Genovese chain in the New York metropolitan area.
Eckerd proved to be a monkey on Penney’s back. The cost of remodels, infrastructure, logistical problems and a mixed team of Eckerd and Penney associates on the store level and corporate level, did not go well.
Penney’s dumped the Eckerd brand but not before having to take $1.3-billion charge against earnings in connection with selling the drugstore chain, which had accounted for 45 percent of its annual revenues
A charge-off is an expense on a company's income statement that is either related to a debt that is deemed uncollectible by the reporting firm, and is subsequently written off of the balance sheet, or a probable one-time extraordinary expense incurred by a company that negatively affects earnings and results in a write-down of some of the firm's assets.
With the loss of all those stores and two distribution centers, the loss of jobs in the trucking industry will hit hard.
In addition to Penney’s, it was a rough year for retail in general. The Sports Authority went belly- up, declaring bankruptcy and closing all of its 460 stores.
The following companies all closed stores in 2016:
· Wal-Mart 265 – 165 outside of the U.S.
· Aeropostle – 154 stores
· Kmart/Sears – 78
· Macy’s -140
· Ralph Lauren- 50
· The Limited – 250
· Office Depot 400, and 300 over the next three years
Pundits and the numbers seem to indicate that K-Mart /Sears and Office Depot’s bottom numbers are not favorable for longevity. Both companies have been on life support for years.
For the full year 2016, JC Penney reported net sales of $12.5 billion compared to $12.6 billion in 2015, a (0.6) % decrease. Comparable store sales were flat for the year.
Penney’s has weathered the storm before, creative financing and investors have kept it alive, if it can survive an ever-changing retail world is to be seen.
Its impact on the trucking industry and the un-employment rate, should be somewhat muted by the abundance of jobs in the trucking industry. That does not make the change any easier though for those involved and their families, the ones who don’t get corporate golden parachutes or a severance package.
Retail is a tough world, shoppers stopped being loyal decades ago and “cherry pick” the best sales items from each company instead of one stop shopping. It’s a buyer's market, margins are thin and shoppers are demanding.
Don’t hold on to those gift cards for too long.
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