J.C. Penney the department store chain said it cut over 300 jobs and posted disappointing same stores sales for its quarter that including the all-important holiday shopping season. It also released a muted outlook. Shares fell by 6% on the news.
The news on Friday overshadowed the chain’s strong profits due to investors worrying about the retailer’s ability to remake itself during the changing environment of the retail market, especially due to the solid economy contributing to much stronger results at other chains such as Kohl’s and Macy’s.
J.C. Penney cut 130 positions amongst all departments at its headquarters in Plano, Texas, and said the restructuring of store, district and regional support teams that will eliminate much bureaucracy led to another 230 lost jobs. It estimated that the job cuts would save between $20 million and $25 million annually. The retailer also made personnel changes at the executive level.
Like many of today’s department stores, J.C. Penney is attempting to reduce costs and make its stores better able to connect with shoppers that are jumping between stores and online.
Department stores, which depend heavily on sales of clothing, have seen much more competition as Amazon.com continues to expand into fashion, while off-price locations such as T.J. Maxx and other stores increase the pressure.
Penney CEO Marvin Ellison on Friday told analysts that the retailer has pinpointed 300 locations in malls where it is going to increase mattresses, appliances, furniture and work clothing such as overalls.
Revenue at stores opened 13 months or more increased 2.6%. In contrast same store sales for Kohl’s were up 6%, it biggest gains in 17 years. Nordstrom saw an increase in same store sales of 2.6%, while Macy’s broke close to a three year slump in sales to post a 1.4% gain in sales at same stores during its holiday period.
Penney is attempting to operate like a more modern business, and is also playing catch-up. Penney has experienced other challenges in bringing sales back after a poor attempt at reinventing itself. It has brought back since then major appliances such as dishwashers and expanded its in-store beauty shops.
It also acknowledged that it is behind in the race of active and casual clothing trends. Therefore, it has expanded selections of brands such as Adidas and Nike, which should be helpful in perking up sales of clothing, which have suffered due to being weak in selection.