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J.C. Penney says store closings won’t hurt its omnichannel efforts

February 24, 2017 03:32 PM
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J.C. Penney Co. Inc. will close up to 140 stores and a pair of distribution centers this year, but the retailer aims to ensure that scaling back its physical presence doesn’t interfere with its push to integrate its online and offline operations.

J.C. Penney, No. 33 in the Internet Retailer 2016 Top 500 Guide, announced the closings Friday ahead of releasing its fiscal fourth quarter 2016 earnings. The retail chain did not specify which stores would be affected but said a distribution center in Lakeland, Fla., will close and that it will sell its Buena Park, Calif., distribution facility. The retailer has 1,014 store locations, so the closures will impact about 14% of its stores. Chief financial officer Edward Record said those stores account for less than 5% of J.C. Penney’s total sales.

As part of the store closings, the retailer is offering voluntary early retirement to 6,000 employees.

“One of the key points in deciding which stores we would close was to make sure that we still could service our omnichannel customer effectively,” CEO Marvin Ellison told analysts on the earnings call, according to a transcript from Seeking Alpha. “We'll be very aggressive this year rolling out a ship-from-store initiative that's going to allow fulfillment of online orders from a significantly higher percent of stores than we've ever done.”

Ellison said more than 77% of all online orders cycled through one of J.C. Penney’s stores in some way in 2016, while more than 90% of the retailer’s returns are processed through its stores. It is with those figures in mind that the retailer aims to improve the in-store experience for online shoppers.

“We rolled out Droid-based mobile devices to all stores this past holiday season that allow the associate to process a buy online, pick-up in store order remotely on the sales floor without having the customer to stand in line or go to any type of a service desk,” he said. “We're going to continue to lean into (buy online, pick up in store) and lean into ship-to-store. We have some exciting initiatives we'll be announcing in the coming months.” He did not give details on those efforts except to say they will optimize J.C. Penney’s store and digital platforms to create a unique and easy-to-use shopping environment for customers.

J.C. Penney does not break out online sales in its quarterly earnings reports, but Ellison told analysts that online sales grew by double digits both during the quarter ended Jan. 28 and the full fiscal year. With online sales growing, the retailer plans to make more products available to online shoppers.

“In the fourth quarter, we increased our online SKUs by 40% and we have plans for continued SKU expansion throughout 2017,” he said. “In Q1 of this year, we have plans to increase our online SKU assortment by over 140% versus last year.”

For the fourth quarter ended Jan. 28, J.C. Penney reported:

  • Net sales of $3.961 billion, down 0.9% from $3.996 billion during the same time last year.
  • A comparable-store sales decline of 0.7%.
  • Net profit of $192 million, compared with a $131 million loss last year.

For fiscal 2016, J.C. Penney reported:

  • Net sales of $12.547 billion, down 0.6% from $12.625 billion last year.
  • Comparable-store sales were flat.
  • Net profit of $1 million, compared with a loss of $513 million.
 

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