Penney’s Plans to Slash Up to 242 Stores

Three days after it filed for bankruptcy court protection, J. C. Penney is looking at operating with a slimmed-down network of 604 stores, down from 846, according to a business plan filed Monday with the Securities and Exchange Commission. And while the department store company expects its e-commerce business to fiscal 2019’s trajectory until the second quarter of fiscal 2021, store sales are unlikely to stabilize before holiday that year, it said.

Penney’s already has 20 sites on the chopping block, but to whittle down to 604 doors, the mass merchant is planning on cutting an additional 222 locations, more than the 200 store closings cited in early estimates prior to Friday’s filing. Penney’s made its store closing decisions with an eye on the bottom line; the 604 remaining locations generated 82 percent of net sales for fiscal year 2019. The plan calls for 192 stores to close in fiscal year 2020, while another 50 company-owned stores are set to be sold by the end of the second quarter in the next fiscal year.

With only top-performing brick and mortars remaining, four-wall profitability is expected to rise from $1.38 billion per store in fiscal 2019 to $1.77 billion under the new plan. Penney’s said 376 stores will be leased while 228 will be company-owned doors.

Penney’s plans to bump its presence in A & B malls to 62 percent from 58 percent, increase its mall presence 2 percent to 74 percent, and increase per-store revenue to $12.4 million from $10.8 million in fiscal year 2019. The company also plans to exit 116 metro statistical areas that contributed just 7 percent of fiscal year 2019 revenue. Most stores will be indexed toward 30 percent presence in the Midwest, 21 percent in the South and 17 percent in the Southeast.

Store sales in fiscal year 2019, on 846 doors, totaled nearly $9.17 billion, and are expected to generate $6.75 billion in fiscal 2024 once the plan comes to fruition.

Penney’s expects fiscal 2020 store net sales to fall between 60 percent to 70 percent of previous expectations, and not return to its pre-crisis trajectory until the critical fourth quarter of fiscal 2021, which means it’s banking on a decent holiday selling season. E-commerce sales, meanwhile, are estimated to return more quickly, rising to robust levels by the second quarter of fiscal 2021. By providing a curated shopping experience, Penney’s believes its digital platform will drive $2.3 billion in sales by fiscal 2024, up from $1.5 billion in fiscal 2019.

Penney’s plans to double down on e-commerce, streamline its store network toward profitability, maintain or grow its share of brick-and-mortar sales, “leapfrog to the ‘new normal’” of consumer shopping behaviors and reinvent for the future in real-time.

Two distribution centers are set to close in fiscal year 2021. And it plans to reduce corporate overhead by at least 25 percent by fiscal year 2022.