The company said it had agreements with most lenders regarding a settlement plan that would allow it to stay in business as a financially healthier company, but would include the closure of 846 stores that had not been announced previously. As part of the settlement process, JCPenney arranged to borrow an additional $ 450 million from lenders to pay for operations during the reorganization.
The company blamed the Covid-19 pandemic because of the need to file for bankruptcy.
“Until this pandemic strikes, we have made significant progress in rebuilding our company under the Renewal Plan strategy – and our efforts have begun to bear fruit,” said CEO Jill Soltau. “Implementing this financial restructuring plan through a court-supervised process is the best way to ensure that JCPenney will build more than 100 years of its history to serve our customers over the coming decades.”
How the mighty has fallen
JCPenney’s most profitable year was 2010, and its net loss has reached $ 4.5 billion since then.
Since the summer of 2011 he has reported net income in only five quarters, all in the holiday shopping season – he cannot make money without increasing sales. Since early 2011, JCPenney has closed more than 20% of its stores while cutting more than 40% of its staff.
In November, when the new holiday shopping season was about to begin, losses shrank in the third quarter, and raised earnings forecasts, even as sales continued to fall.
“We are making significant progress in our efforts to return JCPenney to sustainable and profitable growth,” Soltau said in a statement at the time.
This is the Covid-19 company that has the most impact – and at least
In addition to cutting almost all of JCPenney’s income, it makes future prospects for troubled retailers far more bleak.
“The pandemic recession is … accelerating the shift of consumers towards online retailing,” said Kalinda Ukanwa, assistant professor of marketing at Marshall University of Southern California Business School.
The retail sector is problematic
Filing a company bankruptcy does not always mean that JC Penney will go out of business. Many companies use this process to reduce debts and other obligations that they are unable to do when closing operations and unprofitable locations. J.Crew and Neiman both intend to stay in business. But Stage Store said it plans to permanently close all nearly 800 of its small department stores if it cannot find buyers during the bankruptcy process.
But this is a unique time for retail bankruptcy filing. Many stores are closed due to quarantine and orders remain at home, and many potential buyers are restless wandering to open stores.
UBS analysts said on Monday that “the closure of retail stores will accelerate in the post-Covid-19 world” and that the gap between well-positioned retailers and struggling chains will develop due to the outbreak.