JC Penny, the struggling retailer, announced yesterday they will be closing thirty-three stores which have not been performing well and eliminating an estimated 2,000 jobs, all in an effort to reduce their operational costs. The closings could occur as early as May of 2014 and are expected to save the company an estimated $65 million in annual cost savings.
JC Penney CEO Mike Ullman issued a statement Wednesday noting that the decision was difficult, but he believes the steps “address a strategic priority to improve the profitability of our stores and position JC Penney for future success.”
What did investors think about JC Penney’s decision?
Investors did not like the news. Stocks for the Fortune 500 company slid 1.1% in after-hours trading Wednesday following the announcement. This is just the latest in a string of failures for this ailing company. Over the past 12 months JC Penny has seen their stocks plunge more than 60%, they have ousted their CEO Ron Johnson last year after his failed efforts to turn the company around and the company has continued to lose hundreds of millions of dollars each quarter.
What went wrong at JC Penney?
JC Penney’s failure didn’t start with Ron Johnson, but it didn’t end with him either. Ron Johnson was hired to turn the company around but was let go after a two-year run as CEO. Experts note that before Ron Johnson joined the company the economy was just coming out of the Great Recession. Many retail stores were faced with declining sells, including stores similar to JC Penney, such as Kohls and Macys.
During his tenure, however, it seemed everything he tried backfired. In fact, while he was CEO the company lost an estimated $985 million and their stocks fell 25%. So what went wrong? Experts note, unlike a Macys, which services higher end customers, and Kohls, which focuses on sales, JC Penney seems to have lost their identity.
Once a store for the middle-income families, especially for men’s and women’s apparel, children’s ware, and home goods, families began to question why they would go through the hassle of fighting the crowds at the mall to shop at JC Penney when you could get similar items at discount stores such as TJ Maxx, Marshalls, Walmart, Target and Kohls.
What about the customer who wanted specialty items? There again customers began to question why they would go to JC Penney when you could shop at stores like The Gap, Aeropostle, and The Limited.
Current plan for JC Penney
In April JC Penney ousted CEO Ron Johnson and brought in Mike Ullman to the top post. Frequent sales and coupons are back with an increased focus to bring back the hipper, more affluent shopper. Other familiar store labels such as St. John’s Bay are back. Focus will also return to the once successful area of “home departments” where new designers like Jonathan Adler and Michael Graves have been added.
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