J.C. Penney exiting catalog, closing some stores
Monday, January 24, 2011
PLANO, Texas (AP) — J.C. Penney Co. is getting rid of its catalog business and closing some stores, outlets and call center locations in an effort to streamline operations and boost profits.
The department store operator also said Monday that Vornado Realty Trust Chairman Steven Roth and activist investor William Ackman will become board members. Penney’s enacted a “poison pill” in October after both Ackman and Vornado took large stakes in the company.
Ackman and his hedge fund Pershing Square Management have pushed for major changes at retailers he holds stakes in, such as Borders Group Inc. and Target Corp.
Penney plans to close six underperforming stores and two call center locations. It is also reorganizing its custom decorating business, which includes closing a custom decorating fabrication plant in Sacramento, Calif., and shifting to managing 300 decorating studios instead of 525 of its current in-store studios.
According to the announcement from Penney, none of the closings involve stores in Missouri.
The retailer’s exit of its legacy catalog business including shuttering 19 outlet stores that carry a large amount of catalog merchandise. It will also close one furniture outlet store in Rancho Cucamonga, Calif.; it will have two remaining such stores.
The company did not disclose how many job cuts would be involved in the actions, which will take place during the course of the year.
J.C. Penney currently runs more than 1,100 department stores in the U.S. and Puerto Rico.
“As we continue to position our company for the future, we determined that these steps are necessary to capitalize on the growth opportunities we see ahead while we ensure we are managing costs appropriately and continually enhancing the profitability of our operations,” Chairman and CEO Myron E. Ullman III said in a statement.
The retailer based in Plano, Texas, expects the moves to add about 7 cents per share to 2012 earnings. It will take one-time charges of about 8 cents a share in the fourth quarter and 5 cents per share in 2011 related to the actions.
Earlier this month J.C. Penney reported revenue at stores open at least a year rose 3.7 percent in December, part of the crucial holiday selling period. The figure is beat analysts’ expectations and is a key indicator of a retailer’s health because it gauges results at existing stores instead of newly opened ones.
Ackman and Roth are expected to be a part of J.C. Penney’s board by its board meeting on Feb. 22, increasing the board’s size to 13 members from 11 members. Another director is expected to be added in the near future, the company said.
When Ackman disclosed the stake in October, he said Penney’s stock was undervalued and he planned to discuss “business, assets, capitalization, financial condition, operations, governance, management, strategy and future plans.”
In Penney’s statement Monday, Ullman said, “We welcome Bill and Steve to the Board. They share our passion for operational excellence and are committed to enhancing value for all of the company’s shareholders.”