- JCPenney has filed for Chapter 11 bankruptcy.
- It said it would close an undisclosed number of stores as part of the restructuring process.
- The department store has been in the midst of a turnaround plan in order to reduce its roughly $4 billion in debt.
- It was forced to temporarily close all of its 850 stores amid the coronavirus pandemic but began to reopen certain locations at the beginning of May.
JCPenney has filed for bankruptcy, with the 118-year-old company buckling under pressure from the coronavirus.
The company joins the growing list of large clothing retailers forced to file for bankruptcy protection, joining Neiman Marcus, J. Crew, and True Religion.
It said it would close an undisclosed number of stores as part of the restructuring process.
Citing people familiar with the matter, Reuters reported on April 14 that the department store chain was exploring bankruptcy after the coronavirus pandemic forced it to temporarily close all of its 850 stores.
In a May 14 filing with the Securities and Exchange Commission, JCPenney said it had made a $17 million interest payment.
It began to reopen stores in certain states at the beginning of May, implementing safety measures like plexiglass at registers and contactless curbside pickup.
“Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy — and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt,” CEO Jill Soltau said in a press release about the bankruptcy filing.
The company said it had secured $900 million in debtor-in-possession financing as part of its bankruptcy filing.
JCPenney has faced years of struggles, failing to turn a profit since 2011. Like many other department stores, it’s faced slumping sales as shoppers increasingly turn to online options and mall foot traffic declines. It has also faced stiff competition in off-price retailers like TJ Maxx and Ross Stores. Frequent changes to the executive team and shifting strategies did not help matters.
It attempted to rebrand itself several times, first chasing after younger shoppers before reverting back to trying to attract middle-aged women shopping for their family.
“JCPenney hasn’t created an experience that solidifies a place in consumers’ shopping habits,” Kathy Gersch, executive vice president of the consultancy firm Kotter, told Business Insider in 2018. In a separate interview, Gersch said, “They are creating an experience that isn’t right for anyone. They are trying to serve too many people at the moment.
JCPenney has closed dozens of stores in recent years, including six stores and a Kansas customer service center that permanently shuttered at the beginning of 2020. It reported that comparable salesdecreased by 7.7% for the fiscal year ending February 1.
JCPenney had been in the midst of a turnaround plan, spearheaded by CEO Jill Soltau, that involves reducing inventory and sharpening its focus on its core audience of middle-class families.
Read the full statement from Soltau:
“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country. As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company. Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.
Implementing this financial restructuring plan through a court-supervised process is the best path to ensure that JCPenney will build on its over 100-year history to serve our customers for decades to come. We believe the RSA and the widespread support we have received from our asset-based lenders and first lien lenders will allow us to pursue a financial restructuring on an expedited timeframe. We are also encouraged by the level of support we have received from our vendor partners, landlords, and other stakeholders, whose confidence in our business and our people is expected to contribute to a successful reorganization.
We have a newly refreshed, highly experienced team of retail executives who remain focused on rebuilding our business and restoring financial strength to JCPenney. This team has continued to innovate even during these challenging times, implementing substantial improvements to our flagship eCommerce platform to increase efficiency and ensure our loyal customers continue to have access to the products they need through elevated shopping experiences. I would also like to thank all of our outstanding associates for their continued dedication to our company and their passion for meeting and exceeding our customers’ expectations. We are continuing to serve our customers as we move through this process with a commitment to working seamlessly with our vendor partners and landlords. We look forward to emerging from both Chapter 11 and this pandemic as a stronger retailer, continuing to implement our Plan for Renewal, and building capabilities focused on satisfying customers’ wants and needs.”