JCPenney recently announced plans to shut down 130 to 140 locations, as traditional department stores fight to stay relevant against the threat of online retailers.
Now, many shoppers are wondering if their neighborhood JCPenney will be on that list.
Which JCPenney stores are closing? 3 risk factors
Although the retailer has not yet released a list of the affected stores, we do have some clues about the direction in which the company is headed.
“The stores identified for closure either require significant capital to achieve the Company’s new brand standard or are minimally cash flow positive today relative to the Company’s overall consolidated average,” JCPenney said in a news release.
Here are a few key facts about the stores that are closing:
- 13% to 14% of store portfolio (JCPenney has about 1,000 stores)
- Less than 5% of total annual sales
- Less than 2% of EBITDA (Earnings before interest, tax, depreciation and amortization)
- 0% of net income
Using this information and statements from the company’s CEO, Clark.com has identified three risk factors. If this sounds like the JCPenney near you, it may be on the chopping block.
1. Parking lot test
Never have to worry about finding a parking space at your Penney’s? There may be reason to worry about its future because all of the closing stores are underperforming.
“Comparable sales performance for the closing stores was significantly below the remaining store base and these stores operate at a much higher expense rate given the lack of productivity,” JCPenney said.
If your JCPenney belongs to a struggling mall that’s losing a Macy’s and/or Sears this spring, that’s another red flag.
2. Rural area
Before JCPenney announced plans to close stores, JCPenney CEO Marvin Ellison spoke about the need to downsize at a Dallas real estate conference.
As DallasNews.com reported, he made a comment about stores in rural parts of the country.
‘But there are some smaller market locations where we have to decide, does the mall or our store meet our brand standards,’ Ellison said. ‘If I wouldn’t want my children to work there or my wife to shop there, then we need to create standards with our mall partners to spend capital.’
Many of these smaller market locations are reportedly in the Midwest and West.
3. Store condition
Does your JCPenney look like it was due for a remodel 10 years ago? That could be a problem as the retailer works to raise its “overall brand standard.”
Going forward, JCPenney said it will focus on these growth initiatives:
- Beauty offerings
- Broad array of special sizes
- Affordable private brands
- Quality home goods and services
“During the year, it became evident the stores that could fully execute the Company’s growth initiatives of beauty, home refresh and special sizes generated significantly higher sales, and a more vibrant in-store shopping environment,” Ellison said.
He added that it’s essential to keep stores that present the “best expression of the JCPenney brand.”
List of stores coming soon
In a news release, JCPenney said that it will release a full list of the 130 to 140 affected locations in mid-March. The stores will be shut down during the second quarter of 2017.