JCPenney announced a series of actions designed to allow it to focus on high potential growth opportunities by reducing investment in areas of the business that no longer contribute meaningfully to its financial performance. Steps include closing underperforming store locations, winding down its catalog and outlet operations, and streamlining call center operations and custom decorating business.
Myron E. (Mike) Ullman, III, chairman and chief executive officer, said, “We are focused on increasing profitability and accelerating our growth. To achieve this, we undertook a thorough evaluation of our operations to ensure we are managing costs and allocating our resources to the strategies that will best drive both our top and bottom line, with the objective of delivering enhanced returns to shareholders."
Actions JCPenney is taking include:
• Closing five JCPenney department stores located in Morrow, Ga.; West Dundee, IL.; Des Moines, IA; High Point, NC; and Culpeper, VA; and one JCPenney Home Store located in Duluth, GA. These six locations no longer meet the company’s profitability threshold.
• Completion of the wind down of the company’s legacy catalog business, including exiting its catalog outlets. This business includes a total of 19 outlet stores, which carry a significant amount of catalog merchandise. This will occur over the course of 2011 and 2012. Additionally, the company will be consolidating its furniture outlet business, closing one store located in Rancho Cucamonga, CA. Upon the closing of this store, the company will have two remaining furniture outlet stores to handle the disposition of surplus furniture from its retail store operations.
• Realignment of its call center operations through closing its facilities in Grand Rapids, MI, and Albuquerque, NM, and consolidating all activity supporting its department store and online customers into three existing facilities in Columbus, OH, Pittsburgh and Milwaukee.
• Reorganization of its Custom Decorating business to redeploy resources that drive productivity and profitability while creating a more compelling offer for customers. As part of this process, the Company will close its Sacramento, CA, Custom Decorating Fabrication facility, leaving one remaining facility in Statesville, NC, where it will increase its staffing to support customer demand. Additionally, the company will move from managing 525 individual, in-store custom decorating studios to supporting 300 studios in key markets.
JCPenney will initiate these actions over the course of 2011 and expects that they will result in a positive impact to earnings in 2012, the first full year of implementation, of approximately $25 to $30 million, or approximately $0.07 per share. Additionally, there will be estimated one-time charges of approximately $30 million, or $0.08 per share, in the fourth quarter of fiscal 2010 and approximately $20 million, or $.05 per share during 2011 to reflect the transition.