The end is near for about one out of every six JCPenney stores.
The bankrupt company said they started store-closing sales Wednesday at 136 locations, which will last between 10 to 16 weeks. Five of those stores have been closed since mid-March due to the COVID-19 pandemic, and are only reopening to hold the liquidation sales.
The company, which filed for bankruptcy on May 15, said it also reopened 115 stores on Wednesday that will remain in business — at least for now. The company told the bankruptcy court that it plans to close about 250 stores, about 30% of its overall network of 846, by the middle of 2021.
Store-closing sales are vital for bankrupt retailers to raise cash during the court-supervised reorganization. With many stores closed because of health concerns in late March and throughout April, some bankruptcy filings were delayed because of the inability to hold store closing sales, according to industry experts.
The flood of retail bankrupticies that started in May, as businesses were allowed to reopen, could continue to pick-up steam now that store closing sales are again possible. Tailored Brands, the owner of Men’s Wearhouse and Jos. A. Bank, has warned it might need to file for bankruptcy, while Ascena Retail Group, owner of clothing chains Lane Bryant, Justice, Ann Taylor and Dress Barn, recently announced that there is “substantial doubt” about its ability to remain in business.
But just how successful these closing sales will be is not clear, with many shoppers still reluctant to venture out to stores due to health concerns, and other consumers cutting back purchases due to record job losses in recent months.
With the 120 stores reopening Wednesday, JCPenney now has virtually its entire network of stores open again. Only 19 of 846 stores remain closed at this time for various reasons.
JCPenney is the largest national retailer to file for bankruptcy in the wake of the pandemic, along with J.Crew and Neiman Marcus.
All three companies said they intend to stay in business. The bankruptcy process allows companies to shed debt and other liabilities it can no longer afford. It also can give a company a second lease on life, and and some companies that filed for bankruptcy in the recent decades, including General Motors and many of the nation’s airlines posted record profits after emerging from bankruptcy.
But not every company that files for Chapter 11 planning to stay in business is able to do so. Pier 1, which filed for bankruptcy February 17, ahead of the stay-at-home orders that shut many stores nationwide, has since said it will permanently close all of its stores and go out of business.
JCPenney may have been forced into bankruptcy by the Covid-19 crisis, but it has been ailing for a number of years, as shoppers turned away from traditional department stores and malls to buy more goods from online retailers such as Amazon or big box retailers, such as Walmart, Costco or Target, which offer lower prices and a wider range of goods, including groceries.
The widespread store closing sales at JCPenney is further bad news for rivals such as Macy’s, Sears and Kohl’s, which now must compete with rock-bottom prices at many JCPenney stores.
JCPenney, founded in 1902, was in its day a retail powerhouse. But with shoppers shifting away from department stores in recent decades, it has seen a sharp sales decline. It was last profitable in 2010, and has struggled under a mountain of unaffordable debt with net losses that have totaled $4.5 billion.
The last decade has also been filled with one strategic mistake after another, as a revolving door in executive leadership brought it four different CEOs. Radical changes meant to revive JCPenney — including ending coupons and clearance sales in an attempt to capture more upscale shoppers, and introducing household appliances — were spectacular failures.