Could Amazon’s next acquisition target be J.C. Penney Co. Inc.?
Penney’s is bankrupt, bracing to close at least 200 stores, and is considering selling itself. If the company doesn’t emerge healthy by restructuring through Chapter 11, liquidation becomes a possibility. And Amazon is said to be a contender for either all or parts of Penney’s.
”There is an Amazon team in Plano [Tex.] as we speak,” said one source who does business with the web giant. “There is a dialogue and I’m told it has a lot to do with Amazon eager to expand its apparel business — for sure.”
Others speculate that Amazon could convert Penney’s units to its own high-tech retail format which, with their checkout-free environments, seems most relevant in a socially distancing COVID-19 ravaged society. “This could be a new tech-driven retail model,” said the source.
Amazon could also convert some Penney’s sites into distribution centers. “Penney’s has about 30 freestanding locations with a lot of land, which could be converted,” the source said. “They do have some good real estate.”
A sale of Penney’s is no certainty, but a deal wouldn’t be expensive given the chain’s bankrupt state and seriously depressed stock price.
Amazon declined to comment on whether it is interested in Penney’s.
But Amazon isn’t the only one kicking the tires of the bankrupt retailer. Some developers are also said to be eyeing Penney’s, including the Simon Property Group and Brookfield. They don’t want to see Penney’s go dark permanently because of the negative ripple effect it would have in their shopping centers.
Meanwhile, J.C Penney is signaling its vision for a future built around a shrunken store footprint — what it describes as a plan to streamline by around 30 percent — as well as stronger e-commerce operations.
In an 8-K filing on Monday to the U.S. Securities and Exchange Commission, the bankrupt retailer indicated plans to close some 242 stores over two years, bringing its count from 846 stores as of fiscal-year 2019 down to 604 stores by fiscal year 2021. That isn’t necessarily a final number, and indicates just the company’s “latest thinking on stores as of April 2020,” according to a footnote in the filing.
“The approximately 604 future fleet represent the highest sales-generating, most profitable and most productive stores in the network,” the company said in the filing.
The retailer also said it plans for e-commerce to be a “bigger driver of enterprise sales,” growing from $1.5 billion in e-commerce net sales in fiscal year 2019 to $2.3 billion in fiscal-year 2024. The company also projected its earnings before interest, taxes, depreciation and amortization to grow to $935 million in fiscal year 2024, a little over 10 percent of net sales.
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