Retail giant, J.C. Penny has decided to close down three of its North Dakota stores within this year as part of its effort to lower its costs and boost profitability. The North Dakota stores are located in Dickinson, Wahpeton, and Jamestown.
J.C. Penny is also closing down its department stores at the Philadelphia Mills Mall and the King of Prussia Mall. Its store at Willow Grove Park will also be closing. In South California, J.C. Penney’s department store at the Village at Orange will also be closing. North California stores in Bishop, Richmond, and Lodi are also set to close.
J.C Penny spokesman Joey Thomas said, “It is essential to adjust our store portfolio and invest in those locations that offer the best expression of the J.C. Penny brand and can function as a seamless extension of the omnichannel experience.”
These closures which represent 14% of the total store portfolio of J.C. Penny, are part of the 138 stores that J.C. Penny is closing nationally. A major reason for the closures is the competition brought forth by online retail. Online shopping has led to the demise of many department stores in malls.
There is a silver lining to these closures as these stores to be closed less than 5% of its yearly sales. They will also save $200 million yearly on payroll expenses and lease or occupancy agreements.
Moody’s vice president Christina Boni said in an October 2016 report, “Department stores have felt the sting of the shift to off-price retail and e-commerce competitors, which is reflected in declining mall traffic. Increased markdowns to clear merchandise experienced by major players dampens consumers’ willingness to pay full price and underscores the sector’s biggest Achilles’ heel: Its slow supply chain.”
Most of the layoffs will happen in June and will lead to 5,000 people becoming unemployed. J.C. Penny said that the liquidation of the affected department stores should start on April 17.
Another reason for the decline of department stores such as J.C. Penny is because off-price retailers like T.J. Maxx are getting more popular. Nordstrom Rack, which focuses on value pricing is also getting a slice of the pie in the market share of department stores.
Other department stores that have downsized includes Sears and Macy’s.
Last month, J.C. Penny offered retirement packages to around 6,000 of their employees.
J.C. Penny’s performance and profits declined significantly under the leadership of Ron Johnson in 2012 and 2013.
The current CEO, Marvin Ellison, led J.C. Penny to a $1 million profit performance in 2016. One of the areas that he is looking to enter is the home services market which is valued at $300 billion. Ellison is looking to add more kitchen and laundry appliances in its stores. It is also seeking to partner with Trane so that it can provide heating and air conditioners.
Ellison said, “We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce while leveraging physical locations to minimize the growing operational costs of delivery.”
Marvin Ellison was previously with HomeDepot.