One of the biggest names in retail is closing up to 140 stores in the coming year.
J.C. Penney on Friday announced the store closings — without specifying which stores will close — along with an early retirement plan targeting about 6,000 employees.
Although the company reported a profit of 64 cents a share, coming in better than estimates, it also reported a 0.7 percent drop in sales for the final three months of 2016, somewhat worse than expected.
“We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers,” Chief Executive Officer Marvin Ellison said in a statement.
The actions will “allow us to raise the overall brand standard of J.C. Penney,” he added.
Ellison said Penney will “pivot our retail strategy toward non-apparel” and “significantly expand” toy sales, Ellison said.
“During the year, it became evident the stores that could fully execute the company’s growth initiatives of beauty, home refresh and special sizes generated significantly higher sales, and a more vibrant in-store shopping environment,” he said, noting that even in a world where online sales are crucial, onsite locations are also vital.
“Maintaining a large store base gives us a competitive advantage in the evolving retail landscape since our physical stores are a destination. It is essential to retain those locations that present the best expression of the J.C. Penney brand,” he said.
The company will save about $200 million in annual costs by closing the stores, which account for about 13 to 14 percent of its store base but generate less than 5 percent of annual sales.
One analyst viewed the move as a positive step.
“Although JCP ended its fiscal year with a shrink in sales, it can take some comfort from the fact that the decreases are modest and that it managed to outperform its main department store rivals,” said Neil Saunders, managing director of GlobalData Retail, in an email.
Saunders also said company’s profit was a good sign.
“In our view, this alone serves as evidence that Marvin Ellison’s turnaround plan is delivering and that JCP is finally getting its house in order.”
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