JC Penney Closing 33 Stores, Cutting 2,000 Jobs

Andrew Klips |

In its ongoing bid to get back on its feet, embattled retailer JC Penney Company, Inc. (JCP) announced after Wednesday’s closing bell that it is shuttering 33 underperforming stores across the U.S., including five stores in Wisconsin, a state where rival Kohl’s (KSS) has a strong presence.  With that comes the dismissal of approximately 2,000 employees.

Penney’s has shed more than 40,000 positions in the last couple years, against a backdrop of diving sales.

Penney’s thinks that the move will save the company about $65 million annually, starting this year. Inventory at the stores will be sold with the store closings expected to be completed by early May.

The company added that it expects a pretax charge of about $26 million in Q4 2013 and about $17 million in future quarters related to the store closings.

On the optimistic side of the tracks, Penney’s is proceeding with opening a new store in Brooklyn, New York. JCP still has more approximately 1,100 stores nationwide.

"As we continue to progress toward long-term profitable growth, it is necessary to reexamine the financial performance of our store portfolio and adjust our national footprint accordingly," said Myron E. Ullman, III, chief executive officer of JCPenney. "While it's always difficult to make a business decision that impacts our valued customers and associates, this important step addresses a strategic priority to improve the profitability of our stores and position JCPenney for future success."

In April last year, Ullman returned to the helm of Penneys, replacing Ron Johnson (whom had replaced Ullman) after 16 months as CEO. Ron Johnson poor showing to try and turn the company around earned him the dubious distinction as numero uno on Fox Business’ list of the worst CEO’s of 2013.

For Johnson’s part, he tore the company apart from top to bottom and tried to put it back together with new management and promotional philosophy. Needless to say…he failed miserably and was given the boot. Investors who lived through the turmoil like to point a finger (I won’t say which finger) at hedge fund billionaire Bill Ackman, whose Pershing Square Capital Management had an 18-percent stake in the company and fought ferociously to put former Apple (AAPL) retail head Johnson into the big office at JCP.

When Ackman dumped his shares of JCP in August, it was reported that he lost more than $500 million on the investment. A look at Ackman’s history with retailers – he also lost big on Target (TGT) – should have any retailer shaking when the activist investor comes calling.

With all that water under the bridge, Ullman still faces a tall task to save the 111-year old iconic retailer. Analysts are expecting the company to have a net loss of about 70 cents in the latest quarter, which included the important holiday season.

Shares of JCP are still sitting near 25-year lows, closing Wednesday at $7.01 for a gain of 1.2 percent on the day. Shares moved modest lower to $6.95 in extended trading following the restructuring news.

The list of the stores that will be closed (and the shopping center if applicable)

Selma, AL  - Selma Mall

Rancho Cucamonga, CA - Arrow Plaza

Colorado Springs, CO - Chapel Hills Mall

Meriden, CT - Meriden Square

Leesburg, FL - Lake Square Mall

Port Richey, FL - Gulf View Square

Muscatine, IA - Muscatine Mall

Bloomingdale, IL - Stratford Square Mall

Forsyth, IL - Hickory Point Mall

Marion, IN - Five Points Mall

Warsaw, IN - Marketplace Shopping Center

Salisbury, MD - The Centre at Salisbury

Marquette, MI - Westwood Plaza

Worthington, MN - Northland Mall

Gautier, MS - Singing River Mall

Natchez, MS - Natchez Mall

Butte, MT - Butte Plaza Shopping Center

Cut Bank, MT

Kinston, NC - Vernon Park Mall

Burlington, NJ - Burlington Center

Phillipsburg, NJ - Phillipsburg Mall

Wooster, OH - Wayne Towne Plaza

Exton, PA - Exton Square Mall

Hazleton, PA – Laurel Mall

Washington, PA - Washington Mall

Chattanooga, TN - Northgate Mall

Bristol, VA - Bristol Mall

Norfolk, VA - Military Circle Mall

Fond Du Lac, WI - Forest Mall

Janesville, WI - Janesville Mall

Rhinelander, WI - Lincoln Plaza Center

Rice Lake, WI - Cedar Mall

Wausau, WI - Wausau Mall

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc 97.90 1.47 1.52 35,140,174
JCP J.C. Penney Co. Inc. 7.83 0.15 1.95 11,664,986
KSS Kohl\'s Corp. 35.39 -0.20 -0.56 3,586,706
KWIPF Kiwi Property Group Ltd 1.00 0.00 0.00 0
TGT Target Corp 68.69 0.76 1.12 7,586,661

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