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Hammered by internet, US chain closing 140 stores

Customers ride the escalator at a JC Penney store in New York City. (Reuters Photo)

One of the largest department store chains in the United States plans to close 14% of its stores as shoppers are increasingly deserting malls to buy online.

JC Penney Co announced on Friday that it would shutter 140 of its 1,000-plus stores and trim about 6,000 jobs through early retirement, as it seeks to adjust to a world of lower mall traffic and fierce online competition.

While the closings represent 14% of the company’s store base they account for about 5% of its total sales, the Texas-based chain said. The moves, which also include shutting two distribution centers, will save about $200 million a year.

JC Penney’s plan echoes the announcement by rival Macy’s last year that it would shut about 100 of its stores to adjust to a world where consumers increasingly prefer shopping online to visiting malls. Sales at JC Penney, which is still working to recover from a disastrous attempted reinvention, are less than half of their 2002 peak.

“We must take aggressive action to better align our retail operations for sustainable growth,” CEO Marvin Ellison said in a statement.

The stores will close in the second quarter, and the company will take a charge of about $225 million related to the plan in the first half of this year.

Ellison has been working to attract customers by expanding partnerships and increasing its assortment of big-ticket items, such as appliances. The company also is investing in services such as salons that consumers can’t get online.

The strategy had shown some success. JC Penney posted its first profit since 2011 in the fiscal year that ended on Jan 31, with net income of $1 million. 

Still, the outlook is rocky. The company forecast that same-store sales in the current year would rise by 1% in a best-case scenario.

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