Penney Store Closings And Job Cuts To Save Company $65 Million
This past Wednesday, J.C. Penney announced it would be closing down 33 stores throughout the nation and cutting 2,000 jobs. The changes are part of an effort to save nearly $65 million each year.
J.C. Penney Ceo, Myron Ullman III, stated recently, “As we continue to progress toward long-term profitable growth, it is necessary to re-examine the financial performance of our store portfolio and adjust our national footprint accordingly.”
Ullman recently returned to his CEO position with the company after Ron Johnson was fired from the position. The company has experienced ongoing financial turbulence for the past few years while attempting new retail tactics. During Johnson’s time as CEO, an attempt to restructure the company’s strategy included replacing sales and promotions with everyday low prices. This move devastated revenue and the retail giant saw its stock drop by almost 80% in two years.
Now, Penny has claimed it will shut down stores that are underperforming. However, some analysts and industry experts are suspicious of how effective a cut of 33 stores out of 1,100 locations will really be. Given its current struggle, some surmise this move won’t be sufficient to generate a significant improvement.
“The hole is too deep,” claimed Burt P. Flickinger III, of the Strategic Resource Group consulting company. He added, “This is a warning shot across the bow to landlords to try to provide accommodations or concessions, like on common area maintenance charges or lease reductions.”
— CNNMoney.com (@CNNMoney) January 16, 2014
Ken Nisch, chairman of JGA retail consultants, seems to disagree. Nisch observed that many other chains are getting rid of stores in the less frequented malls. As Penney’s closings will represent such a small fraction of their total locations, he claims, “If (the company’s performance) was really bad, they would be closing 100 stores.”
Despite the company’s two-paragraph statement last week claiming that it was “pleased” with its holiday performance, there was a lack of any additional real supporting information. Stock subsequently went down, as many assumed the silence was really due to unfavorable sales results Penney didn’t want to divulge.
Closings are expected to take place by May of this year.
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