J.C. Penney said Wednesday it will close 33 underperforming stores and lay off 2,000 employees as the venerable but troubled retailer continues a sweeping turnaround effort. The company said the closings will save about $65 million a year beginning in 2014. It will take pretax charges of $26 million in the fourth quarter and $17 million in the first quarter. The stores are expected to be closed by May. “As we continue to progress toward long-term profitable growth, it is necessary to re-examine the financial performance of our store portfolio and adjust our national footprint accordingly,” says company CEO Myron Ullman III. Penney said the closings are part of its turnaround, which began in April when Ullman returned to lead the company. He’s largely undoing the strategies implemented by former CEO Ron Johnson, who was pushed out after an overhaul that included eliminating sales and promotions in favor of everyday low prices caused revenue to plunge. Sales at stores open at least a year are up in the fourth quarter after falling steadily the past couple of years, notes analyst Kirk Ludtke of CRT Capital Group.
Net sales in the third quarter were $2.78 billion, vs. $2.93 billion in the year-ago period. “I think he’s done a good job of stabilizing the situation,” Ludtke says. The embattled company’s stock price is near a 52-week low. Penney made its announcement after the close of regular trading Wednesday. Shares edged 0.6% lower in after-hours trading, to $6.97. By shutting poorly performing outlets, Ludtke says Penney is simply catching up to other national chains that have streamlined their store portfolios in recent years. Penney hasn’t closed a large number of locations since 2000 and 2001. Ken Nisch, chairman of JGA retail consultants, says many chains are eliminating stores in sparsely visited malls. Penney’s closings represent 3% of its 1,100 locations. The layoffs will affect 1.7% of the chain’s 116,000 employees. “If (the company’s performance) was really bad, they would be closing 100 stores,” Nisch says. The company is the latest retailer to retrench. Macy’s, which is considered a strong retailer, said last week it will lay off 2,500 workers, close some stores and open others. And several retailers have cut their fourth-quarter profit forecasts. Nisch is among analysts who say the moves partly reflect broader industry trends. Holiday sales were disappointing for many retailers as cold winter weather and a wait for bargains kept many customers at home. Slow wage growth for low- and moderate-income workers has particularly affected middle-end stores such as Penney. And many customers have shifted their shopping online. More