J. C. Penney Company Inc (NYSE:JCP) surprised its loyal customers in St. Louis, Missouri when it unexpectedly announced it is closing its department store in the Hampton Village Plaza shopping center on January 21, 2018.
The Hampton Village J.C. Penney employs 45 people; some will be transferred to other stores while others will be laid off and given a week of severance pay.
The closure of this Missouri retail location came as a total surprise. While the retail giant announced earlier this year its plans to close 138 stores nationwide, this particular store was not on the list. But clearly, things changed for the flagship location that operated in the historic plaza since 1949.
Joey Thomas, a spokesman for the Plano, Texas-based department store chain, commented, “As part of the company’s ongoing efforts to achieve sustainable growth, long-term profitability and an engaging shopping experience across all customer touchpoints, we continually evaluate our store portfolio to determine whether there’s a need to close stores that do not meet all company objectives.”
The Hampton Village Plaza J.C. Penney obviously didn’t meet the company’s objectives. The 50,000 square foot department store will begin a liquidation sale on January 2, 2018.
J.C. Penney Closed 138 Stores in 2017
After weak 2016 holiday sales (where comparable store sales declined 0.8%) and ongoing competition from online giants like Amazon.com, Inc. (NASDAQ:AMZN), J.C. Penney announced in February that it was closing 138 stores. The company said it wanted to focus its efforts on its locations with the most potential.
“Our decision to close stores will allow us to raise the overall brand standard of the Company and allocate capital more efficiently,” said Marvin Ellison, CEO of J.C. Penney.
The department store did not say how many jobs would be lost as a result of the closures but it did say it was offering early retirement to 6,000 full-time employees. The store closures, which are expected to save the company $200.0 million annually, were expected to be completed by the end of June.
In March, J.C. Penney finally announced the locations slated for closure. The 138 stores represented about 14% of the store locations but just five percent of sales. It also said that about 5,000 employees would lose their jobs.
Echoing his earlier sentiment, Ellison said, “We believe closing stores will… allow us to adjust our business to effectively compete against the growing threat of online retailers.”
J.C. Penney’s 3rd-Quarter Net Sales Declined Due to Store Closures in 2017
In November, J.C. Penney announced its financial results for the third quarter ended October 28, 2017. Total net sales fell 1.8% year-over-year to $2.81 billion. The decrease is mainly a result of the 2017 store closures. Comparable sales inched up 1.7%.
J.C. Penney reported a third-quarter net loss of $128.0 million, or $0.41 per share, an almost 50% increase over the third quarter 2016 net loss of $67.0 million or $0.22 per share.
The adjusted net loss was $102.0 million, or $0.33 per share compared to an adjusted net loss of $65.0 million, or $0.21 per share in the same prior-year period.
For 2017, the retailer expects to report:
- Comparable store sales in the range of -1.0% to 0.0%
- Adjusted earnings per share of between $0.02 to $0.08
- Free cash flow of $200.0 million to $300.0 million
Time will tell whether J.C. Penny’s cost-cutting measures will help it compete with online retailers and other brands like Wal-Mart Stores Inc (NYSE:WMT) or whether it will need to implement additional cost-cutting measures throughout 2018.
“JCPenney closing Hampton Village store in St. Louis, holding liquidation sale,” St. Louis Today, December 21, 2017.
“JCPenney Announces Plan To Optimize Retail Operations, Advance Growth And Drive Profitability,”J C Penney Company Inc, February 24, 2017.
“JCPenney Reports A 1.7 Percent Increase In Comparable Sales For The Third Quarter 2017,” J C Penney Company Inc, November 10, 2017.