JCPenney filed for Chapter 11 bankruptcy protection on Friday, a not wholly surprising move for the beleaguered department store chain stressed even further by the effects of COVID-19.
As part of this, the retailer will reduce its store footprint by about 30%, moving from 846 stores to about 604, according to an SEC filing on Monday. The remaining stores make up about 82% of the company's fiscal year 2019 net sales.
It will also double down in e-commerce, with the intention of driving $2.3 billion in sales by fiscal year 2024, and will explore opportunities for a third-party sale process.
JCPenney had been undergoing a multi-year transformation strategy under CEO Jill Soltau to cut costs, reduce inventory, and heighten the customer experience. Soltau joined as JCPenney CEO in 2018, having previously held leadership roles at Joann Stores, Shopko, Sears and Kohl’s, and last fall the company opened an experiential retail store in Texas last fall that leveraged customer insight data for a store exemplifying the company’s forward-looking mission.
The company was also returning to a visual merchandising strategy centered around five “lifestyles” that it was using to inform its product and experience decisions.
“Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy — and our efforts had already begun to pay off,” Soltau said in a statement. “While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”
She noted that, prior to the health crisis, the company had successfully met or exceeded guidance on all five financial objectives for 2019, and saw comp-store sales improvement in six of eight merchandise divisions in the second half of 2019 vs. the first half.
The company received approvals from the U.S. Bankruptcy Court for the Southern District of Texas to access and use its approximately $500 million in cash collateral, enabling it to continue paying non-furloughed associates, provide some benefits to all associates, and pay its vendors.
It will also continue to open select stores as part of a phased approach coordinating with local and state governments, as well as continue to offer contact-free curbside pickup at all open locations. The company also continues to make improvements to its e-commerce platform, said Soltau.
JCPenney currently employs around 85,000 associates.
The retailer joins Neiman Marcus Group as being among the first retail department chains to file for bankruptcy protection as a result of the effects from the spread of the coronavirus. J.Crew Group, which operates the J.Crew and Madewell brands, also filed earlier this month.
The bankruptcies align with the massively challenged retail landscape, which saw year-over-year sales drop 21.6% in April.