Struggling department-store operator J.C. Penney announced it will cut 2,000 jobs and close 33 stores, as it tries to get back on the path to profitability.
The news raises concerns that Penney’s year-end-shopping-season sales were not what the company hoped for and that the chain needs to do even more to recover from a turnaround plan that has had disastrous results.
J.C. Penney Co., based in Plano, Texas, said earlier this month that it was pleased with its year-end results, but declined to give sales figures, raising worries among Wall Street analysts about how the season actually fared.
The cuts announced Wednesday should save more than $65 million annually. The company will take $26 million in pretax charges in the third quarter and $17 million in future quarters. Penney has 116,000 staffers and operates more than 1,100 stores. All the job cuts are related to the store closings.
The year-end season is crucial, since it can account for anywhere from 20 percent to 40 percent of a retailer’s annual sales. But at J.C. Penney, the stakes are higher.
Penney is trying to recover from massive losses and plummeting sales drops that occurred under former CEO Ron Johnson, who was ousted in April after being on the job for 17 months. The company then brought back former CEO Mike Ullman.
Penney has since reinstated the frequent sales events that Johnson ditched. It’s also restored basic merchandise, particularly store brands like St. John’s Bay, which had been either phased out or eliminated in a bid to attract younger, more affluent shoppers.
Penney had been releasing monthly sales figures over the last few months, which had showed some improvement. Sales at stores open at least a year edged up 0.9 percent in October — the first increase since December 2011. That’s a key indicator of a retailer’s health. Last month, the company said that revenue at stores open at least a year jumped 10.1 percent in November, helped by a strong start to the year-end shopping season.
But on Jan. 8, it offered no figures regarding December sales when it came out with a brief release to update investors on its year-end performance. It said that it was “pleased with its performance for the holiday period,” and that the season showed “continued progress in its turnaround efforts.” It also reaffirmed its outlook for the fourth quarter that was first announced in late November. At that time, it said that Penney’s revenue at stores open at least a year and gross profit margin will likely improve “sequentially” and year over year.
Penney’s shares fell 2 cents, to $6.99, in after-hours trading Wednesday when Penney made the announcement, after gaining 8 cents to close regular trading at $7.01. The shares have lost 84 percent of their value since February 2012, when investor enthusiasm was high over Penny’s transformation plan.