J.C.Penney Co. returned to profitability in 2016 but will downsize dramatically in the months ahead by closing 130 to 140 stores and two distribution facilities.
“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,” said Marvin Ellison, chairman and chief executive officer of J.C. Penney. “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. 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.”
Penney’s joins Macy’s, Sears and other chains which have decided to close many stores this year.
For the fourth quarter, the company had a net income of $192 million versus a loss of $131 million in the year-ago period, representing a $323 million improvement.
Net sales at $4 billion were flat compared to a year ago. Comparable store sales were down 0.7 percent.
Home, Sephora, salon and fine jewelry were the top performing merchandise divisions during the quarter.
Geographically, the Southeast and Pacific were the best performing regions of the country.
For the full year, net earnings came to $1 million, versus a $513 million loss in 2015, representing a $514 million improvement in net income. Net sales amounted to $12.5 billion compared to $12.6 billion in 2015, a 0.6 percent decrease. Comparable store sales were flat for the year.
“We are pleased that in the face of a very challenging 2016 retail environment we delivered our first positive net income since 2010,” Ellison said. “As recent as 2013, J.C. Penney reported a net loss of nearly $1.3 billion, or $5.13 per share, and negative EBITDA of $641 million. This year, we delivered positive net income and generated EBITDA of over $1 billion. This is a reflection that the growth initiatives we laid out at our analyst meeting are working. These initiatives drove significant category growth in the fourth quarter, and provide us a platform to build upon in the years to come. Although our quarter was negatively impacted by the first three weeks of November, we are pleased that we delivered positive sales comps in the combined December and January period. We also saw record online performance over the holiday season, and with our continued focus on improved site functionality, expanded and enhanced fulfillment and continued growth in our assortment, we know this will allow us to deliver significant growth in the digital business.”
Ellison continued, “This year was not without its challenges, particularly in our women’s apparel business, but I am proud this team delivered on our goal to return our company to profitability in 2016. This is no small feat when considering the situation a few years ago, but our over 100,000 associates embraced our strategy and came to work each day focused on doing their part to drive this incredible turnaround in profitability.”