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J.C. Penney to close 18 full-line stores, nine specialty stores

J.C. Penney is trimming its real estate footprint as it looks to allocate its resources to stores and initiatives that offer the greatest long-term value potential.

The retailer on Thursday reported earnings and sales for the fourth quarter that beat the Street. It also said it will close 18 department stores (including the three locations previously announced in January) and nine home and furniture stores in 2019.

Earlier this month, Penney announced it would stop selling appliances and furniture in its stores and concentrate on driving improvement in women’s apparel, fine jewelry and other key businesses. The decision to exit the categories was the first major change under Jill Soltau, who was appointed CEO in October 2018.

Penney said the impacted store locations, which are expected to shutter in the second quarter, all had comp sales performance that was well below its remaining store base. The company expects to record an estimated pre-tax charge of approximately $15 million during the first half of 2019 related to the closings.

Penney’s net income totaled $75 million, or $0.24 per share, for the quarter ended Feb.28, compared to net income of $242 million, or $0.77 per share in the year-ago period. Adjusted net income was $57 million, or $0.18 per share, which was seven cents above Street estimates.

Total revenue declined 8.4% to $3.79 billion, but was above analysts’ forecasts of $3.72 billion. On a shifted basis, which compares the 13 weeks ended Feb. 2, 2019 and Feb. 3, 2018, comparable sales decreased 4 %. On an unshifted basis, comparable sales decreased 6%. Jewelry, women’s apparel, children’s apparel and men’s apparel were the company’s top performing divisions during the quarter.

Total net sales for fiscal 2018 decreased 7.1 % to $11.66 billion, compared to $12.55 billion for fiscal 2017. Comparable sales decreased 3.1 % for the year.

In positive developments, Penney reduced its inventory by 13.1% in 2018. In a statement, Soltau highlighted the inventory reduction and other actions the chain has taken to improve its positioning.

“As we forge a path to sustainable profitable growth, our decisions included eliminating non-core and low gross margin product categories, significantly reducing unproductive inventory and continuing the revitalization of our women’s apparel business," she said. "While we are pleased with these actions, we know we need to move faster to reestablish the fundamentals of retail, build capabilities focused on satisfying our customers’ wants and needs and ensure that our digital and store operations operate seamlessly to provide an experience that wins with customers. We have much work to do to position J.C. Penney for success and create long-term value for our shareholders, however our unwavering focus and discipline is already enabling meaningful progress."

Although Soltau is “the right leader” for Penney, Neil Saunders, managing director of GlobalData, said the company has very little time to course correct.

“The business needs to move at pace and without any missteps – a tall order in today’s complex and fast-moving retail environment,” he said. “Ms. Soltau has noted that J.C. Penney is a revered brand, but such warm sentiments will ultimately mean little unless the company focuses on its customers and gives them reasons to use JCP.” For more commentary, click here.
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