New York: Major US retail department store chain J. C. Penney Company, Inc. announced recently that it plans to close down around 130-140 stores, and two distribution facilities over the next few months.
Buoyed by its return to profitability, the Company is now focussing on optimising its national retail operations. “These strategic decisions will help align the Company's brick-and-mortar presence with its omnichannel network, thereby redirecting capital resources to invest in locations and initiatives that offer the greatest revenue potential,” J. C. Penney said in its statement announcing the move.
"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..." commented Marvin R. Ellison, Chairman and Chief Executive Officer of JCPenney. "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."
Associates who will be impacted by the store and distribution centre closures will receive separation benefits, which include assistance in identifying other employment opportunities and outplacement services such as resume writing and interview preparation. The Company has also decided to initiate a voluntary early retirement programme for about 6,000 eligible associates who will be affected by this decision.
Interestingly, Ellison noted that while the Company’s digital platform jcpenney.com showed double digit growth, the Company was able to leverage its brick and mortar locations “to offset the last-mile delivery cost”.
“We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimise the growing operational costs of delivery,” he elaborated. “In fact, in 2016 approximately 75% of all online orders touched a physical store. Even with a reduced store count, JCPenney is competitively positioned to deliver a differentiated department store model that meets the expectations of a digital world with an inspiring, tangible shopping environment.”
A full list of stores to be closed will be released mid-March the Company said, while almost all closures will take place in the second quarter of 2017.
