JC Penney is to cut 2,000 jobs and close 33 underperforming stores across the US in coming months, just days after affirming a “strong” fourth quarter outlook and “pleasing” holiday season.
The department store retailer said the planned lay-offs and closures would take place between now and May, generating annual cost savings of about $65m beginning in 2014.
As part of an ongoing turnround effort following a disastrous rebranding venture led by former Apple store boss Ron Johnson, the company also added that it would incur about $43m in charges from the restructuring. Estimated pre-tax charges of about $26m would be incorporated into the current quarter.
“As we continue to progress toward long-term profitable growth, it is necessary to re-examine the financial performance of our store portfolio and adjust our national footprint accordingly,” said chief executive Myron Ullman.
JC Penney presently has 1,100 stores nationwide and about 116,000 employees. Midwestern states, such as Wisconsin and Minnesota, bore the brunt of the closures, although a new store in Brooklyn, New York, would be unveiled later this year, the company said.
Last week JC Penney reported that customers had responded positively to holiday sale offerings, adding that they were pleased with its performance during the critical gift-giving period. However a failure to provide concrete sales figures rattled investors, and the retailer’s shares fell 10 per cent.
The news followed a similar restructuring announcement on Friday by arch-rival Macy’s. It said 2,500 jobs would be cut and five stores would close as the company streamlined its online and bricks-and-mortar businesses, despite significantly outperforming its rivals including JC Penney, Sears and Kohl’s.
Executives at JC Penney have been battling to reverse the fortunes of the company since 2011, after Mr Johnson stepped down as chief executive. He was originally hired by activist investor Bill Ackman to revive the retailer, only to alienate customers with a radical redesign of stores and the scrapping of popular coupon and sales initiatives.
Mr Ackman, who held a 17.7 per cent stake in JC Penney, put his stock up for sale in August and quit the board after losing up to 40 per cent of his investment.
JC Penney shares slipped 1.43 per cent to $6.91 in after-hours trading in New York on Wednesday.