Pandemic claims another U.S. retailer: 118-year-old J.C. Penney

The coronavirus pandemic has pushed the storied but troubled department store chain J.C. Penney into Chapter 11 bankruptcy. It's the fourth major retailer to meet up that fate.

Within its reorganization, the 118-year-old company said late Friday it will be shuttering some stores. It said the stores will close in phases throughout the Chapter 11 process and information on the first phase will be disclosed in the coming weeks.

Penney may be the biggest retailer to file for bankruptcy reorganization because the pandemic and joins luxury department store chain Neiman Marcus, J.Crew and Stage Stores. Plenty of other retailers are expected to follow as business shutdowns in the united states have evaporated sales. Actually, U.S. retail sales tumbled by a record 16.4% from March to April.

“The coronavirus pandemic has created unprecedented challenges for our families, our family members, our communities, and our country," said Penney's CEO Jill Soltau in a statement. “As a result, the American retail industry has experienced a profoundly different new reality, requiring J.C. Penney to create difficult decisions in running our business to safeguard the safety of our associates and customers and the future of our company. “

Many authorities are skeptical about Penney’s survival even as it sheds its debt and shrinks the quantity of its stores. Its fashion and home offerings haven’t stood out for a long time. And moreover, its middle-to-low income customers have already been the hardest hit by massive layoffs through the pandemic. Many of them will probably shop more at discounters - if they shop at all, analysts say.

“This is a long, sad story,” said Ken Perkins, president of Retail Metrics, a retail research firm. “Penney offers no reason to look there in comparison to its competitors, whether it’s Macy’s or T.J. Maxx or Walmart. How are they likely to survive?”

Penney said that it has $500 million in cash readily available and has received commitments of $900 million in financing to help it operate through the restructuring. It said that it'll be looking at different options, including the sale of the business. The restructuring should reduce several billion dollars of its debt and offer more overall flexibility to navigate the financial fallout from the pandemic, Penney said.

Like many shops, Penney is struggling to stay relevant within an era when Americans are buying more online or from discounters. Sears has been reduced to a couple hundred stores after being bought by hedge fund billionaire and its former chairman Eddie Lampert in bankruptcy in early 2019. Barneys New York closed its doors earlier this year and Bon-Ton Stores went of business in 2018.

The pandemic has just put department stores further in peril because they see their sales evaporate with extended closures. Even while retailers like Penney learn to reopen in states like Texas and Florida that contain relaxed their lock downs, they’re also facing Herculean challenges in making shoppers feel safe to maintain public spaces.

In fact, Green Street Advisors, a genuine estate research firm, predicted in a written report last month that a lot more than 50% of all mall-based shops will close by the finish of 2021. It expects that Penney will eventually liquidate its business, noting a smaller company won't resolve its main problems.

Like Sears, J.C. Penney’s troubles were years in the making, marking a slow decline from its glory days during the 1960s through 1980s when it became an integral shopping destination at malls for families.

The company’s roots commenced in 1902 when James Cash Penney started a dry good store in Kemmerer, Wyoming. The retailer had focused its stores in downtown areas but expanded into suburban stores as they became popular starting in the 1960s. With that expansion, Penney added appliances, hair salons and portrait studios.

But because the late 1990s, Penney struggled with weak sales and heavier competition from discounters and specialty chains which were squeezing its business from both ends. Penney’s began flirting with bankruptcy practically a decade ago when a disastrous reinvention plan spearheaded by then CEO Ron Johnson caused sales to go into free fall.

Johnson drastically cut promotions and earned hip brands that switched off loyal shoppers. As a result, sales dropped from $17. 3 billion during the fiscal year that ended in early 2012 to $13 billion a year later. Many longtime customers walked away and have not returned. Johnson was fired in April 2013 after just 17 months face to face.

Since that time, Penney’s has undergone a series of management changes, each employing different strategies that didn't revive sales. The business located in Plano, Texas, has suffered five straight years of declining sales, which now hover around $11.2 billion. Its shares are trading at significantly less than 20 cents, down from $1.26 this past year, and from its all-time peak of $81 in 2006.

Soltau has acted swiftly since joining the business in October 2018. She jettisoned from stores major appliances which were weighing down operating profits. That reversed the strategy of her predecessor, Marvin Ellison, who brought appliances to the showroom floor after a 30-year absence so that they can capitalize on the troubles of ailing Sears.

Soltau turned the company’s focus back to women’s clothing and goods for the house like towels and bed linens, which carry higher income. Furniture continues to be available, but only online.

Still, profits have remained weak. For the fiscal fourth quarter ended Feb. 1, sales at stores opened at least a year dropped 4.7 adjusted for the exit of appliances. Profits were down 64%.