UPDATE: March 27, 2019: J.C. Penney on Tuesday told Retail Dive in an email that it will "close nine home and furniture stores this fall, which are not reflected in the official store count in the Company’s 10-K," in addition to the 18 stores previously slated for shutdown. The nine home stores are selling off their remaining inventory through the summer and most will shutter this fall, later than the other 18 locations, most of which are expected to close July 5, according to a company spokesperson.
J.C. Penney will shutter 18 full-line stores this year — nearly all in the second quarter — including three previously announced closures, according to a company press release published Thursday detailing the company's fourth quarter performance.
Additionally, on March 1 the company will also discontinue its Big & Tall Box subscription service, which has been run in partnership with startup Bombfell since last year, the company told Retail Dive in an email. J.C. Penney on Thursday also announced the appointment of three new executives, including former senior vice president of apparel and accessories merchandising at Target, Michelle Wlazlo. She will serve as executive vice president and chief merchant.
Fourth quarter total net sales fell 9.5% to $3.67 billion from to $4.05 billion in the year-ago quarter. On a shifted basis, comparable sales in the quarter fell 4%; on an unshifted basis, they fell 6%. Net income for the quarter fell to $75 million from $242 million a year ago. For the full year, net sales fell 7.1% to $11.7 billion from $12.6 billion the previous year. Net loss for the year widened to $255 million (or $296 million on an adjusted basis), from $118 million the previous year, as comparable sales fell 3.1%.
J.C. Penney is in a race against time. Newly arrived CEO Jill Soltau is taking steps to trim costs as she contemplates the next steps in the retailer’s long-running turnaround.
The company is ceasing appliance sales, reintroduced only three years ago after three decades away. The retailer is making changes, however, amid serious sales declines, at a time when most retailers are doing quite well.
"Today’s very weak results underline the fact that JCPenney is now the laggard of the retail industry," GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive. "The chain lost a significant amount of business over the key holiday period as shoppers deserted it in favor of stores that had something more compelling to offer. That consumers drifted away indicates that the results are a function of the failings of JCP rather than weaknesses in the market or structural shifts caused by changes in the way people shop."
Soltau's moves are on point, however, he also said. "Her approach seems levelheaded and customer-centric. She has identified certain areas, like the foray into appliances, which are not working and has acted to remedy them; some stores are also being closed to help improve the financials. She also appears to be building a good team around her."
Soltau is also grappling with deeply ingrained problems not of her making. For example, the discounter is a department store, but is doing little to get shoppers to buy in its various segments. Such "cross-department shopping [has fallen] steadily over the past few years," according to GlobalData research. "In our view, this is down to JCP’s failure to understand who its core customer is and focus on them when it is developing ranges," Saunders said.
That's an existential problem that undercuts other changes beyond cost-cutting that also need to be made, like an upgrade in fashion merchandising, a more robust private-label offering and improvements to customer experience, according to Saunders. "Without an adequate understanding of the audience this task is impossible to complete with any modicum of success," he warned. "Equally, revitalizing the store experience requires a knowledge of how the core customer shops and what they want from a physical environment."
It's also a problem that requires time to solve. But the retailer doesn't really have time, and its iconic status isn't likely to save it. "As much as we firmly believe Jill Soltau is the right leader, our main concern is that JCP has very little time to course correct," Saunders said. "The business needs to move at pace and without any missteps – a tall order in today’s complex and fast-moving retail environment. Ms. Soltau has noted that JCPenney is a revered brand, but such warm sentiments will ultimately mean little unless the company focuses on its customers and gives them reasons to use JCP."