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J.C. Penney to close up to 140 stores, offer buyouts

FILE - In this Aug. 16, 2005 file photo, customers walk out of a J.C. Penny department store in Dallas.   J.C. Penney said Friday, Feb. 24, 2017, that it will be closing anywhere from 130 to 140 stores as well as two distribution centers over the next several months as it aims to improve profitability in the era of online shopping.(AP Photo/Matt Slocum)
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J.C. Penney (JCP) plans to close 130 to 140 stores and offer buyouts to 6,000 workers as the department-store industry sags in competition with online sellers and nimble niche retailers.

The company said Friday that it would shutter 13 percent to 14 percent of its locations and introduce new goods and services aimed at the shifting preferences of its customer base.

The cuts come amid mounting challenges for once-stalwart department-store chains such as Macy’s and Sears, which are aggressively shedding costs as shoppers flock to alternatives.

Macy’s recently announced plans to cut 100 of its 675 full-line stores, while Sears announced plans to close 150 stores, including 108 Kmart locations, leaving it with more than 1,300.

“It became apparent to us that our footprint was too large,” Penney CEO Marvin Ellison told investors Friday, and the closures will “allow us to raise the overall brand standard of J.C. Penney” and invest in remaining stores.

A list of Penney stores to close will be released in mid-March, and liquidation sales are expected to take place in the first or second quarter.

The closures mark a departure from Penney’s relatively steady store count over the last 15 years. The company had 1,021 stores as of Jan. 30, 2016, down from a high of 1,108 in 2009.

“This is just a market correction,’’ Farla Efros, president of HRC Retail Advisory, said in an interview. “There were too many stores, and too many retailers and too much noise in the market.’’

Asked whether any stores would be shuttered in Florida or Southwest Florida, company spokesman Joseph Thomas reiterated in an email that the information wouldn’t be released until March.

In Southwest Florida, there are stores at the Coastland Center mall in Naples, the Gulf Coast Town Center in south Fort Myers, the Edison Mall in Fort Myers and the Coralwood Shopping Center in Cape Coral. Employees answering the phones at those stores Friday said their locations weren’t closing and they seemed surprised by the question.

“I wouldn’t know what stores are closing,” one employee said.

Online competition, fast-fashion retailers such as H&M and Forever 21 and discounters such as T.J. Maxx have undermined Penney’s business. Ellison said the company is responding by overhauling its products.

Penney is adding toys, beauty products, appliances and home goods as it tries to appeal to a customer base made up of 70 percent women and 70 percent homeowners

The appliances push, paired with the introduction of new home installation services, is targeted at swiping business from ailing competitor Sears.

The retailer is also reducing its emphasis on women’s apparel previously geared toward business outfits and formal wear. Instead, the company is adding athleisure wear, widening availability of Nike and Adidas items and introducing more plus-size products. And the company will shift all of its women’s shoe departments toward “open-sell” environments, in which customers are not typically bothered by sales people.

Despite the moves, Penney’s projected that sales at stores open at least a year would range from a 1% decline to a 1% increase.

That projection “reduces conviction” in the company’s long-term strategy after a previous projection of 3% annual growth through 2019, UBS analyst Michael Binetti said in a note to investors.

“They are moving to match consumer shopping preferences, which should spark opportunity,” Greg Portell, lead partner in the retail practice of consultancy A.T. Kearney, said in an email. “But the challenge will be to execute new merchandising and marketing strategies.”

Penney expects to save $200 million in annual costs in connection with the store-closure plan, including the shuttering of two distribution centers. It will record an initial pre-tax charge of $225 million to cover the initial closure costs.

In a related move, the retailer said it would offer a “voluntary early retirement program” to about 6,000 workers, including corporate, store and supply chain workers.

Ellison said many workers affected by store closures would be hired to fill jobs vacated by employees who accept buyouts.

Penney said Friday that sales at stores open at least a year fell 0.7 percent in the fiscal fourth quarter, which included the crucial holiday shopping season. Overall, net sales were down 0.9 percent to $3.96 billion, while the company swung from a loss of $131 million to net income of $192 million.

But the company said that discounts dragged down profitability and warned that its women’s clothing business struggled.

The company’s stock fell 4.8 percent to $6.53 at 1:44 p.m.

“The department store concept is being put under severe pressure by multiple prevailing trends,” Portell said. “Other channels are simply better suited to drive those consumer promises.”

Ellison told investors that the company would “pivot our retail strategy toward non-apparel.”

That includes a plan to “significantly expand” toy sales after encouraging results from toy sales in a limited number of stores during the holiday season, Ellison said.

One possible route to improved profitability is “regional pricing,” Chief Financial Officer Ed Record said. The company is testing variable pricing at about 60 locations.

“We know we have big opportunities around that,” Record said.

Despite the difficulties, Penney turned a full-year net profit for the first time since 2010, reflecting considerable progress after a brief period in which the company experimented with limiting discounts.

Encouraging signs included sales of home goods, Sephora products, the salon division and fine jewelry. Penney also said it had “record” online sales during the holiday shopping season, without providing figures.

Department stores become endangered as Sears, Macy’s struggle

Is your local Sears or Kmart among 150 stores to be axed? See the list

Macy’s is closing these 68 stores: Is yours on the list?

Contributing: Charisse Jones, Mina Haq

Naples Daily News reporter Laura Layden contributed to this story.

Written By

Avi Adkins is a seasoned journalist with a passion for storytelling and a keen eye for detail. With years of experience in the field, Adkins has established himself as a respected figure in journalism.

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