How Many Stores Will J.C. Penney Close?

Retailers often shutter locations after bad holiday results. Recent rumors say that RadioShack Corp. (NYSE; RSH) will eliminate 500 locations. The Wall Street Journal reported:

It isn’t clear which of RadioShack’s roughly 4,300 stores will be closed and when exactly the closings will begin. The people familiar with the matter noted that it isn’t unusual for companies to close stores when going through a restructuring.

A restructuring is almost certainly in the offing for J.C. Penney.

J.C. Penney has two compelling reasons to lower the number of locations it operates. The first is Wall Street. The company generated a great deal of hope when failed CEO Ron Johnson was replaced by Myron E. Ullman III last April. However, J.C. Penney shares have dropped 60% since then. If the retailer does not save money, and a great deal of money, it will be hard to convince investors it can survive. And J.C. Penney is out of ways to cut expenses, short of pruning its network.

Survival is the other reason J.C. Penney needs to shrink. The most recently reported quarter was its fiscal third quarter. Revenue dropped 5% to $2.8 billion. The net loss for the period was $489 million. The combination of this data and the fourth quarter comparable store sales will cause some of the analysts who follow the retailer to sound more alarms about whether J.C. Penney is viable.

J.C. Penney reports that it has “about 1,000” stores. These are spread across 49 states and Puerto Rico. It is a geographically huge network for a troubled retailer to support. Simple math dictates that, with J.C. Penney’s history of losses, some of these stores must lose significant amounts of money. And the size of J.C. Penney’s store network is at the center of a debate about its future. Even the most successful retailers have a spread of profitability when measured location by location — an inevitable fact of maintaining a huge network for physical locations.

Does the J.C. Penney downsizing include dozens of stores, or even hundreds? There is no saying from outside its executive suite, where store location profits and losses must surely be kept day in and day out. And J.C. Penney executives, seeking to keep the retailer alive, have run out of time.