Retail

20,000 Could Lose Jobs at JC Penney

Douglas A. McIntyre

Published: May 16, 2020 8:16 am

Last Updated: May 16, 2020 8:41 am

J.C. Penney shares are worthless. That leaves J.C. Penney’s 90,000 workers in limbo. J.C. Penney’s new owners, some of its bondholders, will close stores because there is no other way to winnow down losses. Comments that the retailer could close 200 of its approximately 850 stores means roughly 20,000 jobs are in immediate jeopardy.

Like any underperforming retailer with falling same-store sales, J.C. Penney has some locations that do much worse than others do. Retailers try to solve this problem by shuttering their 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. As the footprint shrinks, national advertising becomes a poor way to reach customers. J.C. Penney is no longer a national retailer. It is a collection of stores.

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. The means people who work in administration, management and finance are at risk. The need to have people to support a public company, and investor relations will be gone.

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, but a number of reports put that figure between 175 and 225. 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 more than 150 stores. If each store has the same number of employees (which is not the case), layoffs would reach 20,000. 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 has finally gone down into the dust.