J. C. Penney Company Inc. announced a series of actions designed to allow it to focus on its highest potential growth opportunities by reducing investment in areas of the business that no longer contribute meaningfully to its financial performance.
The actions include closing underperforming store locations, the wind down of its catalog and outlet operations, and streamlining its call center operations and custom decorating business.
"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," said Myron E. (Mike) Ullman, III, chairman and CEO of JCPenney. "The actions we are announcing today are significant steps in an ongoing process to ensure we are best managing costs and allocating our resources effectively to the strategies that will allow us to improve margins and drive profitable sales over the long term. We see significant opportunities ahead in our core department store and online businesses as part of our long range plan and we are well prepared to capitalize on them in 2011 and the years to come."
The actions the company is taking include closing five JCPenney department stores in Morrow, GA; West Dundee, IL; Des Moines, IA; High Point, NC; and Culpeper, VA; and one JCPenney Home Store in Duluth, GA. These six locations no longer meet the company's profitability threshold.
It also will 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 during the course of 2011 and 2012. A company spokesperson said it is reviewing its options on the division, which could include a sale the division, closing the stores or converting some to regular JCPenney stores.
In addition, the company will be consolidating its furniture outlet business, closing one store 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.
Other actions include the realignment of its call center operations through closing its facilities in Grand Rapids, MI, and Albuquerque, NM, centers and consolidating all activity supporting its department store and online customers into three existing facilities in Columbus, OH, Pittsburgh and Milwaukee.
It is reorganizing its custom decorating business and closing a fabrication facility in Sacramento, CA, leaving one remaining facility in Statesville, NC, where it will increase its staffing to support customer demand.
In addition, the company will move from managing 525 individual, in-store custom decorating studios to supporting 300 studios in key markets.
The company 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 million to $30 million.
In addition, there will be estimated one-time charges of approximately $30 million in the fourth quarter of fiscal 2010 and approximately $20 million during 2011 to reflect the transition.
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