JCPenney restructuring to shut stores, catalogue ops

Retailer JCPenney Company Inc is to close six underperforming department stores and wind down its catalogue and outlet business as part of plans to streamline its operations to focus on long-term growth.

The cost-cutting measures revealed today (January 24) also include consolidating its call centers, and reorganizing its custom decorating business into one facility in Statesville, North Carolina and closing 225 in-store studios.

The actions “are significant steps in an ongoing process to ensure we are best managing costs and allocating our resources effectively to the strategies that will allow us to improve margins and drive profitable sales over the long term,” explained chairman and chief executive officer Myron E (Mike) Ullman III.

“We see significant opportunities ahead in our core department store and online businesses as part of our long range plan and we are well prepared to capitalize on them in 2011 and the years to come.”

As well as closing five department stores and one Home Store, JCPenney will exit its catalogue business, including the 19 outlet stores that carry a significant amount of catalogue merchandise. The shut-down will be carried out over the course of 2011 and 2012.

There are also plans to consolidate its call centers by closing facilities in Grand Rapids and Albuquerque. Going forward, three existing facilities in Columbus, Pittsburgh and Milwaukee will support its department store and online customers.

The measures will be carried out this year, and should add $25 million to $30 million, or $0.07 per share, to earnings in 2012.

There will also be one-time charges of $30 million, or $0.08 per share, in the fourth quarter of fiscal 2010 and $20 million, or $.05 per share, during 2011. 

“These steps are necessary to capitalize on the growth opportunities we see ahead while we ensure we are managing costs appropriately and continually enhancing the profitability of our operations,” Ullman added.

Separately today, JCPenney said it has appointed investors William A. Ackman and Steven Roth to the company’s board. Ackman is founder and CEO of Pershing Square Capital Management, and Roth is chairman of Vornado Realty Trust — and between them they are among the retailer’s largest shareholders.

The Plano, Texas based retailer, which operates over 1,100 department stores, was among December’s retail winners, posting a 5.7% rise in same-store sales. And in November, it booked a 62% hike in third quarter profit to $44 million, helped by strong sales of its exclusive fashion brands, including Liz Claiborne and MNG by Mango.

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