J.C. Penney To Close 130-140 Stores, Two Distribution Facilities
J.C. Penney (JCP) announced it is implementing a plan to optimize its national retail operations as part of the company's return to profitability. Under the plan, the company expects to close two distribution facilities and approximately 130-140 stores over the next few months. "These strategic decisions will help align the Company's brick-and-mortar presence with its omnichannel network, thereby redirecting capital resources to invest in locations and initiatives that offer the greatest revenue potential," Penny said. As a result of the store actions, Penney will close a distribution center located in Lakeland, Fla. in early June, at which time operations will transfer to the company's logistics facility in Atlanta as part of a strategic effort to streamline store support services.
The company also is in the process of selling its supply chain facility in Buena Park, Calif. in an effort to monetize a lucrative real estate asset. Associates who will be impacted by the store and distribution center closures will receive separation benefits. The total store closures represent approximately 13-14 % of the company's current store portfolio, less than 5% of total annual sales, less than 2% of EBITDA and 0% of net income. "Comparable sales performance for the closing stores was significantly below the remaining store base and these stores operate at a much higher expense rate given the lack of productivity. Once cycled, these closures are expected to be net income neutral," Penny said.
The annual cost savings resulting from these strategic decisions are estimated at approximately $200M. During the first half of 2017, the company expects to record an estimated pre-tax charge of approximately $225M, primarily lease termination obligation expenses, non-cash asset impairments and transition costs, in connection with this initiative. Nearly all impacted stores are expected to close in Q2 of 2017.
Disclosure: None.