J.C. Penney Co. Inc. (NYSE: JCP) shares likely will drop from their current price of $0.20. The retailer is about to file for Chapter 11 bankruptcy protection, according to a number of press sources. That leaves J.C. Penney’s 90,000 workers in limbo.
Like any underperforming retailer with falling same-store sales, J.C. Penney has some locations that do much worse than others. Retailers try to solve this problem by shuttering its worst-performing stores. The problem is that at some point a large retailer no longer has a national footprint and cannot be a shopping destination for a large portion of U.S. consumers.
Another effect of store closures is that the cost of administration across the entire company becomes a larger portion of overall costs. Central headquarters staff can be big and cumbersome, which drives down corporate profitability or adds to losses.
However, most of J.C. Penney’s employees work in stores. As these stores start to close, the workers become the primary target of layoffs. It is too early to tell how many of the approximately nearly 850 stores will close. In the most recently reported quarter, same-store sales dropped 6%. J.C. Penney lost $225 million for the entire year, on revenue of $11.7 billion, which was down 7% for 2019.
Based on store performance and financial figures, to become profitable, J.C. Penney would need to close about 150 stores. If each store has the same number of employees (which is not the case), layoffs would reach almost 15,000. Some headquarters staff would be laid off as well.
J.C. Penney joins a list of retailers that have hit rock bottom. Most recently, these include J.Crew and Neiman Marcus. Last year, the retailers most badly damaged were Kmart and Sears, which have the same owner.
The list of retailers closing stores also has gotten longer. Most recently, it includes Gap’s Old Navy, Gap and Banana Republic stores.
J.C. Penney is 118 years old. It is finally about to go down into the dust.
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