J.C. Penney Co. is closing some stores, outlets and call center locations and continuing to work on an exit from its catalog business in an effort to streamline operations and boost profits. Locally, the J.C. Penney at Spring Hill Mall in West Dundee is slated for closure.
The department store operator also said Monday that Vornado Realty Trust Chairman Steven Roth and activist investor William Ackman will become board members. Penney’s enacted a “poison pill” in October after both Ackman and Vornado took large stakes in the company.
Ackman and his hedge fund Pershing Square Management have pushed for major changes at retailers he holds stakes in, such as Borders Group Inc. and Target Corp.
In pre-market trading Monday, J.C. Penney shares jumped 3.5 percent, or $1.05, to $31.39.
In an interview on CNBC, Ackman said J.C. Penney is a great company and a great brand, but could be a better retailer. He noted that the company has had success with its Sephora boutiques, but that sales per square foot over the past 10 years have not made progress and margins are off.
Penney reported in November that its gross profit margin slipped to 39 percent from 40.6 percent in the third quarter due to heavy discounting and the discontinuation of its big catalog.
Penney plans to close six underperforming stores and two call center locations. It is also reorganizing its custom decorating business, which includes closing a custom decorating fabrication plant in Sacramento, Calif., and shifting to managing 300 decorating studios instead of 525 of its current in-store studios.
The retailer’s exit of its legacy catalog business includes shuttering 19 outlet stores that carry a large amount of catalog merchandise. Penney announced in November 2009 that it would stop publishing its twice-yearly “big book” catalogs. The company will also close one furniture outlet store in Rancho Cucamonga, Calif.; it will have two remaining such stores.
The company did not disclose how many job cuts would be involved in the actions, which will take place during the course of the year.
J.C. Penney currently runs more than 1,100 department stores in the U.S. and Puerto Rico.
“As we continue to position our company for the future, we determined that these steps are necessary to capitalize on the growth opportunities we see ahead while we ensure we are managing costs appropriately and continually enhancing the profitability of our operations,” Chairman and CEO Myron E. Ullman III said in a statement.
The retailer, based in Plano, Texas, expects the moves to add about 7 cents per share to 2012 earnings. It will take charges of about 8 cents a share in the fourth quarter and 5 cents per share in 2011 related to the actions.
Penney, which will report its fourth-quarter results on Feb, 25, has recently found some success with exclusive brands. The company is the only U.S. retailer to sell Liz Claiborne and Claiborne women’s wear, except the Isaac Mizrahi-designed Liz Claiborne New York brand, which went to QVC. It is also the only department store selling MNG by Mango, a European clothing brand, a big coup as fast-fashion players have been a big threat to department stores.
Earlier this month J.C. Penney reported revenue at stores open at least a year rose 3.7 percent in December, part of the crucial holiday selling period. The figure beat analysts’ expectations; the measure is a key indicator of a retailer’s health because it gauges results at existing stores instead of newly opened ones.
Ackman and Roth are expected to be a part of J.C. Penney’s board by its board meeting on Feb. 22, increasing the board’s size to 13 members from 11 members. Another director is expected to be added in the near future, the company said.
When Ackman disclosed the stake in October, he said Penney’s stock was undervalued and he planned to discuss “business, assets, capitalization, financial condition, operations, governance, management, strategy and future plans.”
In Penney’s statement Monday, Ullman said, ”We welcome Bill and Steve to the board. They share our passion for operational excellence and are committed to enhancing value for all of the company’s shareholders.”
Let me guess, Ackerman is a short squat guy who buys his muu-muu’s by the bolt from his local JoAnne’s Fabrics?
The J.C. Penny Big and Tall catalog was the absolute BEST. Another toad ruins is for anyone who isn’t like him.
Sorry to see JC cutting back. I found the catalog system very helpful.The quality of the clothes very good.
The catalog is one of the few places to find high quality draperies and blinds without paying through the nose for Calico Corners or other places to make them for you. They should have promoted that fact more so people would know about it. What a shame.
So Sephora is a part of JCP? Trying to go upscale without abandoning your “middle class” base is probably a smart thing to do in this economy, but can each and every mall support a JCP and a Sephora? Amy, JCP always had a very good window treatment department and they succeeded on word of mouth for many years. Their quality is right up there. As for JCP’s catalogue sales, when they came out with the specialogue, they duplicated themselves, like Sears. Many like the catalogue, but since, like Sears, the store and the catalogue compete, I’d just rather go to the store. I find extreme sales at the store that aren’t available in the catalogue. They do have underperforming stores in areas where the demographic does not support them, and I have seen those stores close. For the first time in many years, there is a non-anchor JCP located in Avon, Ohio. The store in Elyria Midway Mall does not attract the type of shopper that Avon does. Perhaps getting out of the mall locations might be one of their strategies.
Wonderful. JCP’s catalog was about the only place to get large-sized shoes at a reasonable price. Good quality, and reasonable pricess all around.
Sorry to sound stupid, but is a catalog the same as online shopping? Maybe it’s just the paper catalog they’re getting rid of, not the online business.
I always liked JCP’s catalogs and placed a large order a couple of times a year online. I stopped shopping there, kind of as a protest, after they raised their credit card interest rate a year ago last December just before the new credit card regulations went in. I haven’t shopped JCP since but hadn’t necessarily given up on them. If I can’t do any online shopping (like big and tall mentioned in a previous comment), I probably will just drop them.
Simple solution: Go somewhere else. Kohl’s is a great place for clothes. Sears has made many improvements in it’s own brand the last few years. If someone is not selling what you want, someone else will be.
ronnie10j, I’ve been to Kohl’s. They don’t carry larger-sized shoes and socks, for starters. JCP’s catalog does.
Anyone else think this is all about maximizing short-term profits for somebody’s hedge fund? Meanwhile, another good company goes on the skids.
Could anyone find a list of JC Penney’s store closings for 2011? I have tried over 10 websites to see if my favorite “rural” Penney’s will be affected in Johnsburg, IL. It is one of the only nice stores offering great window treatments with good help. Since we will be moving to WI soon, it is one of the only store I enjoy shopping in for home goods. Since we are decorating our retiremnt house it will cause a GREAT VOID for many of us. Kohl’s is good for many things, but not always my taste.
Regarding a previous comment–I’ve found that JC Penney’s custom decorating studio gave me a much higher estimate for having draperies made than did Calico Corners. And the construction quality and fabric selection was much better at Calico. Maybe you were able to buy ready-mades from the JC Penney catalog, but you cannot compare them to window treatments that are custom made for your home.
It’s so sad to see a Landmark Store closing .. especially sad to know so
many people will be out of jobs !!
Horrible quality lately!!
Down in Florida.I bought a blanket ,as it was my shopping stop ,ALWAYS.I enedeed up sleeping cold as teh blanket was made of poorest form of linty fabric,which I coul’nt sleep with inside the house.Had o keep it in my cars trunk unfolded till I returned it.
They have lost a customer forever……..no window shopping even