Jan. 25, 2001 -- J.C. Penney Co., once a favored destination for generations of middle-class shoppers, said today it will close 47 stores — including four in Indiana — and cut nearly 5,500 jobs in an effort to return to profitability.
The company will close 44 under-performing department stores and three catalog outlets, Penney said. Most will shut their doors by the end of June.
Four of the stories are in Indiana — at Anderson, Bloomington and Martinsville and Indianapolis.
Plano-based Penney, which operates about 1,100 department stores, also said it would close most catalog desks in its Eckerd drugstores.
The moves will eliminate about 5,000 department-store jobs, 300 more at headquarters and regional offices and 265 Eckerd positions — all told, less than 2 percent of the company's work force of 290,000.
Small Town Closings
Penney said it would offer jobs to some of the affected workers.
Some of the targeted stores are in suburban malls in places like Dallas, Houston and White Plains, N.Y. But many are in smaller towns where there is a scarcity of other nationally knownretailers.
Joleen Anderson gathered most of the 25 employees at the Penney store in Susanville, Calif., last week to tell them the bad news.
"It's a business decision, which I fully understand, but it hurts," Anderson said today. "In a small store like this, you're like family."
The only other big retailer in the mountain town of 17,000 is Wal-Mart, and the nearest Penney is about 100 miles away. Anderson, whose husband works at one of two nearby prisons — the biggest local employers — was unsure whether she or any of her employees would relocate to stay with the company.
Thursday's announcement marked the second recent round of Penney store closings. Last year, the company announced it would close 45 department stores and 279 Eckerds.
A longtime landmark on the American shopping scene, Penney has been in a years-long slide amid tough competition from discounters and trendier retailers. Analysts said the company's priormanagement let the stores spiral into depressing, cluttered places that offered stale fashions.
Chairman and chief executive Allen Questrom, a veteran retail executive who took over at Penney in September, said in a statement that the company's cash flow and liquidity remain strong.
"We've got to reduce costs to remain competitive," said the spokeswoman, Rita Trevino Flynn. "And this closing is small compared to recent announcements by other retailers."
Kmart Corp. has closed about 70 stores since July. Sears, Roebuck and Co. said this month it would close 89 stores and lay off 2,400 workers. And Montgomery Ward announced last month itwould go out of business after 128 years, shuttering 250 stores and leaving 37,000 employees in limbo.
Closings Called Necessary
Analysts generally praised Penney's closings as a necessary streamlining, but they cautioned that it won't be easy for Penney to regain its former success.
"When Questrom took over, Penney might have been the most troubled large retailer in America. They did everything they could to alienate their customers," said Kurt Barnard, president ofBarnard's Retail Trend Report. "But they have very good locations.
All they really have to do is repair the infrastructure. The potential is there."
Jeffrey Feiner, an analyst for Lehman Brothers, called the moves "a positive for the company and its shares," boosting Penney's productivity and liquidity.
Closing the stores will mean a loss of about $230 million in sales this year and $350 million annually after that, the company said.
The company said it would take a $275 million charge, about 68 cents after taxes, in the quarter ending Saturday, to cover the shutdown costs.
Employees Nofitied This Week
Penney issued a list of 39 of the 47 stores to be closed — including an Ogden, Utah, store that closed in December — saying the other eight would be identified later this year. Employees at most of the affected stores were notified beginning last week.
After closing most Penney catalog desks inside Eckerd drugstores, only about 100 of the approximately 2,650 Eckerds will continue to offer catalog sales, the company said.
Earlier this week, Eckerd officials said they would close five to seven drugstores this year, which they termed part of a normal review of store performance. Penney officials said they have not identified which drugstores will be closed.
In the third quarter, Penney suffered $23 million in operating losses — and that was before the critical December holiday season, when same-store sales tumbled 1.6 percent from the year before.
Penney had sales of $32.5 billion in 1999, its last full fiscal year.
In trading Thursday, Penney shares fell 56.3 cents, or 4.4 percent, to close at $12.25 on the New York Stock Exchange. Penney stock has slid more than 80 percent since mid-1998.