Amidst a slowing economy, one of the country's largest retailers plans to lay off more than 5,000 employees nationwide.
PLANO, Texas - In an attempt to improve its competitive position and finances, J.C. Penney Co. Inc. plans to close 44 stores and three catalog outlet stores nationwide (at press time). The majority of the closings will occur in the first quarter of 2001, resulting in the layoff of more than 5,000 employees, although some will be offered positions in other stores. An additional 300 jobs will be cut in the home office and field organization. The closings will result in a pretax charge of almost $275 million in the fourth quarter, which ended Jan. 27.
Allen Questrom, JCPenney's chairman and CEO, said in a statement: "The company's cash flow and liquidity remain strong. This restructuring program is an important step in our plan to improve future performance and enhance shareholder value. Our management team is committed to becoming more efficient and effective in providing value to our customers while increasing bottom-line results."
The principally non-cash charge consists of $185 million for JCPenney Department Stores and Catalog and $90 million for Eckerd drugstores. The $90 million Eckerd charge consists primarily of a contract termination, the lay- off of 265 employees and asset write-offs.
The company revealed the locations of 37 of the 44 department stores and two of the three catalog stores. The other locations will be announced at a later date. Only 11 of the 37 announced stores are part of REIT portfolios. Simon Property Group, Indianapolis, will lose five stores; Chicago-based General Growth Properties will lose two; The Macerich Co., Santa Monica, Calif.; The Rouse Co., Columbia, Md.; IRT Property Co., Atlanta; and New Plan Excel Realty Trust, New York, will lose one each.
General Growth Properties is not worried. "We're not at all concerned with how the closings will affect our properties," said Robert Michaels, president and COO of the retail developer. "We look at this as a short-term distraction, long-term benefit."
Michaels also noted that the closings will not hurt regional malls. In fact, he said, most will be able to demand more money from new leases. The exception to this will be rural areas that have smaller stores.
"It will be hard to fill those spots because in most cases, the area already has a major retailer such as a Wal-Mart, Target or Kohl's," said Michaels. But he does agree the smaller stores need to be closed, because in most cases the stores have been losing money.
Retail veteran Questrom, who helped pull his former employer, Cincinnati-based Federated Department Stores Inc., out of bankruptcy, joined JCPenney in September of 2000.
The retail giant has seen its profits and sales plummet in the face of heated competition from discount retailers such as Wal-Mart Stores Inc. and Target Corp.