J.C. Penney has filed its business plan in bankruptcy court, and it calls for a much slimmer department store chain in the future.
The company, which filed for Chapter 11 bankruptcy protection last week, said Monday it would close 242 stores, or 29% of its pre-bankruptcy fleet, and bank on e-commerce growth to help make up the shortfall.
Penney has not reported an annual profit since 2010 and has seen its revenue fall 80% since then, as it has lost market share to the likes of Target and T.J. Maxx, and, to a lesser extent, more direct rivals like Macy’s and Kohl’s. Only a few years ago, Penney had 1,100 stores, so the upcoming closures will only be the latest in the company’s efforts to find the right number of stores.
In its plan, filed with the court and with regulators, Penney did not identify which stores would close, but said 192 would shutter this year and another 50 would close in 2021. Penney also said that 116 smaller markets made up only 7% of sales, so those areas would be the focus for closures.
The company, based in Plano, Texas, said in its plan that the 604 remaining stores were its “highest sales generating, most profitable” and represented 82% of store sales last year.
Penney is hoping that e-commerce will help make up for the drop from store closures within a few years. In 2019 14% of its sales came from online orders, well below the rate at Kohl’s and Macy’s where the category represented about a quarter of sales. By 2024, Penney thinks it can hit $2.3 billion in sales online, or 26% of sales, and gradually get close to the $10 billion total net sales mark in a few years.
The company, which for decades had a catalog business that initially gave it a head start in the department store e-commerce wars, has fallen way behind rivals in recent years, hurt by weak search capabilities for items and poor integration of inventory management systems.
Given how rarely retailers with chronically declining sales pre-bankruptcy filing reemerge from Chapter 11 protection rather than liquidate, Penney is under the gun to convince lenders it can make a go of it as a leaner, more focused retailer. The Wall Street Journal reported on Saturday that Penney’s bankruptcy lawyer warned the court that not proceeding quickly could be “disastrous” for the company.