JC Penney To Close Up To 140 Stores, Offer Voluntary Retirement For As Sales Drop Continues

J C Penney Company Inc JCP said it plans to close two distribution facilities and shut about 130-140 stores over the next few months as the challenging retail environment is eating in to the sales of department store operators.

The announcement of planned store closures comes as the company reported an EPS beat for the fourth quarter, but sales fell short of consensus. JC Penney recorded a 0.7 percent drop in same-store sales for the holiday quarter.

The company will also initiate a voluntary early retirement program for approximately 6,000 eligible associates. The program expires on March 17.

Following is a gist of fourth quarter results and outlook:

• JC Penney Reports Q4 Adj. EPS $0.64 vs $0.61 Est., Sales $3.96B vs $3.98B Est.
• JC Penney Sees FY17 Adj. EPS $0.40-$0.65 vs $0.56 Est.
• JC Penney Expects FY17 Comps At -1% to +1%

JC Penney, similar to its department store peers, has been failing to attract shoppers to its stores as they prefer shopping online and at discount chains.

As such, the retailers are resorting to cost cuts in the form of layoffs and store closures and investing heavily in e-commerce platforms.

"We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers,” CEO Marvin Ellison said in a press release.

Related Link: How Store Counts Of America's Biggest Retailers Changed Since 2007

JC Penney will close a distribution center located in Florida in early June, and is in the process of selling its supply chain facility in California to monetize a lucrative real estate asset.

JC Penney’s total store closures represent about 13–14 percent of its current store base, less than 5 percent of total annual sales, less than 2 percent of EBITDA and 0 percent of net income. JC Penney, which expects to save about $200 million a year from this move, said nearly all impacted stores are expected to close in the second quarter of 2017.

In connection with the store closures and its related costs, the company expects to record an estimated pre-tax charge of approximately $225 million during the first half of 2017.

The company plans to focus more on personalized beauty offerings, special sizes, affordable private brands and quality home goods and services to boost sales. In fact, Home, Sephora, Salon and Fine Jewelry were the company's top performing merchandise divisions during the quarter, while women’s apparel was the weakest.

Shares of JC Penney closed Thursday at $6.86. In the pre-market hours Friday, they fell 2.62 percent to $6.68.

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