Penney to shed 33 stores, cut 2,000 jobs to stem losses
NEW YORK - J.C. Penney Co Inc said on Wednesday it will close 33 stores and cut 2,000 jobs as part of the struggling retailer's efforts to return to profit.
Chief Executive Myron Ullman in a statement called the move an important step that "addresses a strategic priority to improve the profitability of our stores."
Penney, which operates about 1,100 mid-market department stores in the United States, is trying to stanch enormous losses and win back shoppers after suffering a 25 percent drop in sales in fiscal 2012 during a failed attempt to go upmarket.
It has returned to the discounts that were long its hallmark and brought back popular in-house brands.
Sales started ticking up in the autumn after nearly two years of monthly sales drops but remain well below fiscal 2011 levels. A press release last week with scant details on its December sales results raised concerns that the turnaround stalled during the key holiday season.
"It is not surprising to see them close stores given their financial situation," said Maxim Group analyst Rick Snyder.
Analysts expect Penney to report a 70-cent per share loss for the holiday quarter, according to Thomson Reuters I/B/E/S.
The company would not say whether further closings were planned, but Ullman told Reuters in an exclusive interview last month that Penney did not intend to significantly pare the size of its store fleet.
"There's no solution in taking a big chunk of stores and lopping them off — that doesn't solve anybody's issue," Ullman said in the interview.
A Penney spokeswoman on Wednesday said two of the 33 stores were locations owned by the company, with the remainder being leased stores. Penney leases its stores at over half of its mall locations, according to an analysis last year by Green Street Advisors.
The closings, expected to be completed by May, will generate cost savings of $65 million per year, beginning in 2014. Penney expects estimated pretax charges of about $26 million in the current quarter and another $17 million spread across future periods.
The struggling department store chain had 116,000 employees as of February 2, 2013. That was about 40,000 fewer than a year earlier as the company tried to cope with lower sales.
Best Buy Co Inc., and Sears Holdings Corp., are two retailers that in recent years announced significant store closings. Last week Macy's Inc said it was closing five stores, but also opening eight new locations.
Shares slipped 1.6 percent at $6.90 in after-hours trading. They have fallen 70 percent since hitting a 52-week high last February.