J.C. Penney Co. Inc. is banking on fewer stores for bottom-line profitability.
This story first appeared in the January 9, 2015 issue of WWD. Subscribe Today.
The company will shed 39 stores on or around April 4. In connection with the store closures, 2,250 store associates will get pink slips.
The news of the store closures had little effect on Penney’s shares, which closed up 0.8 percent Thursday to close at $7.95. The small increase followed two larger increases in the share price on Tuesday and Wednesday, when Penney’s shares rose 1.9 and 20.3 percent, respectively. The stock began climbing Tuesday after the company said comparable store sales for the combined nine-week November and December period grew 3.7 percent.
The total tally of stores and jobs lost in the latest closures is slightly more than a year ago when the retailer in January 2014 shed 33 stores and 2,000 jobs.
A spokeswoman said that once the planned store closures are completed, the retailer will operate 1,020 sites across 49 states and Puerto Rico. And while the spokeswoman said that the company is “constantly evaluating its store portfolio,” she noted that there are no other store closures planned for 2015.
“While it’s never an easy decision to close stores, especially due to the impact on our valued associates and customers, this was made after a careful analysis of store performance and future strategic fit for the company,” said the Penney’s spokeswoman.
She added that eligible store associates who do not continue with the company will receive separation benefits, including assistance in identifying other job opportunities at nearby Penney’s stores.
The retailer has no plans to open stores in 2015, according to the spokeswoman. The last store opening for Penney’s was in Brooklyn, N.Y., in August.
Of the store sites earmarked for closure, Pennsylvania heads the list with five, while North Carolina has four. Most other states — such as Georgia, Iowa, Ohio and Wisconsin — each have three stores that will close. Other states on the list will see one or two sites scheduled for closure.
Many other states, such as California, Florida and Washington, do not have any locations that are on the store closure list.
Penney’s store closings follow on the heels of The Wet Seal Inc.’s disclosure Wednesday that it was shuttering 338 doors immediately and would keep just 173 sites in operation, although liquidity pressures and the specter of a bankruptcy probably exacerbated the extent of the doors that were closed.
Last year saw Sears Holdings Corp. adjust its store base, shedding more than 200 Kmart and Sears stores and beginning 2015 with a combined store count of 1,700 for the two nameplates.
Retailers typically complete their annual store count review after the holidays to finalize which stores to keep and which ones to shed. The rationalization incorporates a balancing act of individual store profitability, geographic location and operational overhead costs.
Andrew Graiser, copresident of A&G Realty Partners, a real estate advisory firm, expects “more store closures” on the retail front, although nowhere near the “massive” numbers that were closed back in 2009 when the economy tanked in 2008. Graiser said the store adjustments are part of the normal ebb and flow in retail, as closed sites help to make room for new store concepts.
Many retailers have been rethinking their footprints, and even adjusting box size, given consumers’ changing shopping patterns and channel preferences. Online shopping has reduced the need for brick-and-mortar stores. That doesn’t mean physical stores will go away — an increase in showrooming and the move toward ordering online and picking up at a store will still require a brick-and-mortar presence.
Ironically, as U.S. retailers are looking at which stores to shed, Spain’s Inditex is planning to open more than a dozen new Zara stores across the U.S.