Department store chain J.C. Penney filed for bankruptcy protection on Friday and said it would permanently close some of its 850 locations, making it the latest major retailer felled by the coronavirus pandemic.
The 118-year-old retailer was struggling long before the public health crisis forced it to temporarily shutter all of its stores and furlough the majority of its 90,000 employees. It has nearly $4 billion in debt and hasn’t turned a profit since 2010. Sales have fallen for four straight years as it struggled to win back the longtime loyalists who have gravitated to big box chains like Target and Costco to outfit their families.
The filing came the same day Commerce Department data showed the industry’s devastating decline. Retail sales fell 16.4 percent in April, by far the steepest drop on record, with sales at clothing stores – down 89 percent from a year ago – taking the biggest hit.
J.C. Penney is the fourth major retailer – and the largest – to file for Chapter 11 protection this month, after J. Crew, Neiman Marcus and Stage Stores. All four have a heavy presence in shopping malls.
In its bankruptcy filing, J.C. Penney said it has both assets and liabilities between $1 billion and $10 billion, and that it owes money to more than 100,000 creditors. The company, which has about $500 million in cash, said it had secured $900 million to fund bankruptcy proceedings. It also said it would close some stores, but did not provide details on where or when.
“Until this pandemic struck, we had made significant progress rebuilding our company,” Jill Soltau, the company’s chief executive officer, said in a statement. The bankruptcy filing, she said, “is the best path to ensure that JC Penney will build on its over 100-year history to serve our customers for decades to come.”
The filing comes days after the company announced it had awarded $7.5 million in bonuses to its top four executives, saying it was “taking necessary steps” to retain its management team.
The Plano, Texas-based chain, which has cycled through four chief executives in seven years, has tried repeatedly to turn its business around. It has invested in hair salons, built up its baby department and even begun selling used clothing through a partnership with the consignment site ThredUp.
But analysts say the efforts have alienated the company’s most loyal shoppers and failed to win over new ones. The company’s stock price has fallen 80 percent in the past year to less than 24 cents a share.
“The customer experience is forgettable,” Bob Phibbs, chief executive of Retail Doctor, a New York-based consulting firm, told The Washington Post last year. “Nobody is going into a J.C. Penney and saying, ‘You’ve got to see this place. It’s great.’ ”
The retail chain is also losing out to rivals like Walmart, Target and Amazon, which have doubled down on clothing and home goods and spent billions building up their online operations. It also faces growing competition from off-price retailers like T.J. Maxx and Burlington Coat Factory, which have thrived since the Great Recession. (Jeff Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
As a result, analysts say, the gap will widen between the country’s most successful retailers and the rest. The industry has been particularly hard-hit by the pandemic, which has led to the closure of hundreds of thousands of stores and malls. And though some – including a few dozen J.C. Penney locations – have begun reopening, analysts say it could be years before shoppers feel comfortable spending freely again. A record 20 million Americans lost their jobs in April, which sent the unemployment rate soaring to 14.7 percent, a level not seen since the Great Depression.
“The bifurcation that was already happening in retail is just going to accelerate during the pandemic,” said Mickey Chadha, a senior credit officer at the rating agency Moody’s. “The retailers that were already weak – J.C. Penney, J. Crew, Neiman Marcus – are going to come out even weaker.”
Analysts say J.C. Penney, which was founded in Kemmerer, Wyoming, in 1902, has repeatedly tried – and failed – to transform its stores in an era of online shopping. In 2011, the company brought on Ron Johnson, the former head of Apple’s retail operations, to revamp its business. He did away with coupons and tried to build “stores within a store” with brands such as Levi’s and I Jeans by Buffalo. But it didn’t work: Sales fell about 30 percent and longtime shoppers swore off the brand. He was fired 17 months later, in 2013.
The company went through two more CEOs before Soltau, formerly of Jo-Ann fabric and crafts, took the helm in October 2018. She has gradually closed stores, remodeled fitting rooms and replaced furniture and appliances with more clothing. Those efforts improved sales in some stores, analysts said, but not enough to head off a bankruptcy filing that was years in the making.
“They had a new CEO and some creative ideas but they ran out of time,” said Camilla Yanushevsky, an analyst for CFRA Research in New York. “The company was a ticking time bomb.”
(c) 2020, The Washington Post · Abha Bhattarai
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