J.C. Penney Co. plans to close up to 140 stores and two distribution centers in the coming months.
The store closures represent about 13-14 percent of J.C. Penney's store portfolio, or less than 5 percent of total annual sales.
J.C. Penney's outlook for 2017, including the impact of closing stores, calls for same-store sales to be flat, plus or minus 1%.
"Therefore, our decision to close stores will allow us to raise the overall brand standard of the Company and allocate capital more efficiently", said Marvin R. Ellison, chairman and CEO, in a news release.
The company noted that its Home, Sephora, Salon and Fine Jewelry were its top performing merchandise segments during the fourth quarter.
As a result of the store actions, J.C. Penney will close a distribution center located in Lakeland, Florida in early June, at which time operations will transfer to the company's logistics facility in Atlanta. It will also test home installation services like HVAC, a move it feels will attract its customers, 70 percent of whom are female and homeowners.
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Net income in the quarter soared 19.6% to $189 million or $1.42 per diluted share compared to $158 million or $1.14 per share in the same quarter past year.
Comparable store sales in the quarter fell 0.7%. The company will record about $225 million as pre-tax charges in the first half of current fiscal year to reflect termination obligation costs, impairment and transition costs. Payless is also reportedly in talks with lenders regarding a restructuring plan that includes shuttering about 1,000 of its shoe stores.
Penney's Ellison said he understands that closing stores will affect the lives of its employees and that is why it chose to initiate a voluntary early retirement program. The company said that it would also initiate a voluntary early retirement program for about 6,000 eligible employees.
The news of the J.C. Penney closures came as Penney posted a profit for the fourth quarter, compared to a loss the previous year. Analysts polled by Zacks expected $3.97 billion in revenue. Comps are considered a key indicator of a retailer's health, since they measure only the year-over-year performance of stores open at least 12 months.
Comps are seen between -1% and +1%, while gross margins are forecast rising 20 to 40 basis points. The company says it expects a net incerase in hiring with the number of early retirements exceeding the number of affected full-time positions.