Tough holiday season spurs
job, store cuts at J.C. Penney
NEW YORK — J.C. Penney announced it will cut 2,000 jobs and close 33 stores as it tries to get back on the path to profitability.
The news raises concerns that Penney's holiday sales were not what the department-store company hoped for and the chain needs to do more to recover from a disastrous turnaround plan.
J.C. Penney Co., based in Plano, Texas, earlier this month said it was pleased with its holiday results but declined to give sales figures, raising worries among Wall Street analysts about how the season actually fared.
The cuts announced Wednesday should save more than $65 million annually. The company will take $26 million in pretax charges in the third quarter and $17 million in future quarters. Penney has 116,000 staffers and more than 1,100 stores. All the job cuts are related to store closings.
Penney is among a number of stores expected to be announcing staff cuts and store closures in the next few weeks. After the holiday season, stores typically re-evaluate their store fleet and announce job cuts and store closings. But analysts believe that after a tough holiday season where stores had to discount early and often to get shoppers to buy, the cuts will be deeper than normal, says John Challenger, CEO of Challenger, Gray & Christmas, a global outplacement firm. Stores are also contending with a shift in consumer spending to PCs and mobile devices.
Macy's Inc., a standout among its peers, announced last week it was cutting 2,500 jobs as part of a reorganization to sustain its profitability.
The holiday season is crucial since it can account for anywhere from 20 percent to 40 percent of a retailer's annual sales.
Penney is trying to recover from massive losses and plummeting sales under former CEO Ron Johnson, who was ousted in April. The company then brought back former CEO Mike Ullman.
Penney has since reinstated the frequent sales events that Johnson ditched. It's also restored basic merchandise, particularly store brands.