J.C. Penney Co. Inc., in bankruptcy proceedings since May 15, is stepping up its streamlining by letting go 1,000 employees.
The layoffs include corporate, field management and international positions, the Plano, Tex.-based Penney’s said Wednesday in its announcement on the reductions.
“Each of these associates has made valuable contributions to the legacy of J.C. Penney, and we are truly grateful for their service,” said Jill Soltau, the retailer’s chief executive officer. “These decisions are always extremely difficult, and I would like to thank these associates for their hard work and dedication. We are committed to supporting them during this period of transition.”
This latest organizational restructuring will create a “smaller, more financially flexible company, and will help ensure J.C. Penney emerges from both Chapter 11 and the coronavirus pandemic as an even stronger retailer,” Soltau said.
Penney’s has about 85,000 employees, and entered 2020 with 850 stores.
On June 4, Penney’s disclosed the first phase of “optimizing” its retail fleet by identifying 152 stores it would close. Penney’s recently said about 140 stores are in the process of being liquidated. Generally, liquidation of the stores takes 10 to 16 weeks to complete.
Penney’s intends to permanently close nearly a third of its remaining 846 stores in the next two years, leaving the middle American chain with about 600 locations, though some retail experts believe it could shrink down to around 500 locations.
Penney’s is just one of several retailers to declare bankruptcy this year, including J. Crew, Neiman Marcus Group, Brooks Brothers, RTW Retailwinds and Sur La Table. The Ascena Retail Group is a bankruptcy candidate.
“The global health and economic crisis caused by the COVID-19 pandemic has forced retailers to make difficult decisions,” Soltau said. “For J.C. Penney, that includes reducing our footprint and accelerating our store optimization strategy while we implement our ‘plan for renewal.’ As the retail landscape continues to evolve, we will continue to make thoughtful and strategic choices to offer compelling merchandise, drive traffic, deliver an engaging experience, fuel growth, and build a results-minded culture to ensure that J.C. Penney remains at the heart of America’s communities for decades to come.”
The $11 billion Penney’s said it is providing a “comprehensive” benefits package for those being laid off, including severance for eligible associates, health-care coverage through COBRA for those enrolled in benefits, outplacement support, compensation for unused paid time off and extended associate discount benefits.
As announced on May 15, Penney’s restructuring has the support of holders about 70 percent of its first lien debt. The bankruptcy court in Texas has approved $900 million in debtor-in-possession financing. JCP’s deadline to have a business plan approved by their lenders was Wednesday and has been extended to July 31.
So far, Penney’s Chapter 11 process seems to be moving along as best as could have been hoped by the company. Extinguishing debt, fresh financing, closing weak stores — all of that has been enabled through the bankruptcy.
Chances look good that Penney’s will emerge from bankruptcy as an ongoing retail operation, albeit a much smaller one. Penney’s is considering selling itself, and there has been speculation that the Simon Property Group, Brookfield Properties, Sycamore and Amazon are among those that have taken interest, to one degree or another.
Post-bankruptcy, retail experts remain divided over Penney’s ability to survive long term, particularly if the pandemic persists for several seasons and shoppers continue to abandon stores and spend more online.
To survive, much must be accomplished. The image must be widened to appeal to Millennials, the retailer must not lose its appeal to its traditional blue-collar clientele, and the value proposition must be strengthened to win back customers who have defected to the likes of Kohl’s, Walmart, Amazon, TJ Maxx, Primark and Macy’s. And J.C. Penney needs to drive business on its long lagging web site. The company seems dated, lacking flair, and losing market share, and little capital was invested in the stores for years.
Soltau is highly regarded and is the retailer’s first true merchant at the helm in 15 years. She’s been leading efforts to declutter and reorganize the selling floors into lifestyle departments for easier shopping and some style, and highlight the best of Penney’s fashion and private brands, among them Arizona and a.n.a. There has also been cost cutting and some margin growth, and Soltau has rebuilt the management team with experienced executives — no small feat considering Penney’s sinking fortunes.