Up to 50 stores to be closed by Penney

1/24/2001

PLANO, Texas - J.C. Penney Co. plans to shut as many as 50 department stores as part of new Chairman Allen Questrom's strategy to cut costs and revive sluggish profits, officials said yesterday.

The company also will shutter an undisclosed number of Eckerd drugstores, a spokesman said. The Plano-based retailer will announce the closings and release a list of affected stores this week.

In northwest Ohio, Penney has stores in Toledo, Bowling Green, Findlay, Tiffin, Defiance, Bryan, Sandusky, and Lima, and in southeast Michigan in Monroe, Adrian, and Hillsdale.

Mr. Questrom, hired in September, is trying to help J.C. Penney find a niche between discounters, such as Target Corp., and higher-price department stores, analysts have said. He led Federated Department Stores, Inc., out of bankruptcy in 1992 and put Barneys New York, Inc., back on track after its bankruptcy proceedings.

Spokesman Tim Lyons said the stores targeted for closing were identified during an ongoing review of sales performance. He said disappointing holiday season results - same-store sales fell 1.6 percent from December, 1999 - were not a factor in the closings.

“These were underperforming stores,” Mr. Lyons said. “It's tough for the stores that are being closed, but it was something we felt we had to do to begin to turn the business around.”

The timing of the store closings will vary because of lease considerations, but many will close in the spring, he said.

The exact number of store closings in this latest round is “still a moving target,” Mr. Lyons said. The number of job cuts related to the closings also has not been determined.

Mr. Lyons said some employees will be offered jobs at nearby stores but most will be offered severance benefits.

Penney, which has about 290,000 employees, has about 1,100 Penney stores and 2,600 Eckerds.

Officials declined to say how much the company expects to save from the closings or whether it would take a charge against earnings to cover shutdown expenses.

The closings are the second major round for Penney in as many years.

The last big round of closings - 45 department stores and 279 Eckerd drugstores - was announced 11 months ago under Chairman James Oesterreicher. He resigned in May.

In his first public comments since taking over, Mr. Questrom said the company would go through a two-year transition improve sales and profits.

Penney posted a $23 million operating loss in the third quarter. The company hasn't reported fourth-quarter figures, but officials have warned of a difficult holiday season because of disappointing sales and heavy price markdowns.

Penney stock has slid more than 80 percent since mid-1998. Yesterday, Penney shares were up 25 cents, or 2 percent, to close at $12.50 on the New York Stock Exchange.