JC Penney Lives to Die Another Day

By Douglas A. McIntyre Published Sep 10, 6:29AM EDT

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JC Penney Lives to Die Another Day — © southbeachcars / Flickr

The deal to rescue decimated J.C. Penney, one of America’s oldest retailers, seems fairly simple. Mall owners Simon Property Group and Brookfield Property Group buy most of the company’s assets for $1.75 billion in cash and debt. Lenders H/2 Capital Partners, Sculptor Capital Management, Brigade Capital Management and Sixth Street Partners write off about $5 billion in debt. The mall owners get 490 locations. The lenders get 160 stores and distribution centers. Simon Property Group and Brookfield Property Group lease those. The mall owners get to keep a tenant. The lenders get some of their money back. It makes sense, but it does not solve J.C. Penney’s primary problem. Fewer and fewer people want to shop at its locations. A smaller store footprint worsens the trouble.

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J.C. Penney cannot emerge from its status as a zombie retailer. It not only faces similarly-sized operations like Kohl’s, which has over 1,100 locations, or Macy’s, which has over 550. Target, America’s second-largest retailer, dwarfs J.C. Penney. And Walmart, the nation’s largest retail, has 4,700 stores and owns what is said to be the second-largest e-commerce site in the United States based on traffic. This helps drive in-store pickup and the curbside pickup so essential to revenue when COVID-19 shutters other retailers’ locations. Walmart also has started a customer loyalty program to help it compete with Amazon.com, which has robbed brick-and-mortar retailers of customers for over a decade. J.C. Penney sits on Amazon’s list of victims.

J.C. Penney has not had the capital to overhaul most of its aged stores. That harms its ability to draw customers back to its aisles. SimilarWeb puts JCPenney.com’s online traffic at 26 million visits in August. By contrast, the Walmart.com figure stood at 424 million. Amazon’s number clocked in at almost 2.6 billion.

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J.C. Penney, like most retailers, needs a spike in holiday sales to make up for slower traffic earlier in the year. In 2020, those sales could make or break it. Given its badly damaged reputation, limited number of stores and withering competition, it has little or no chance to pull off a comeback.
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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.