J.C. Penney to close stores as part of restructuring; names Ackman to board
Dallas -- J.C. Penney on Monday unveiled a restructuring plan, which includes close five department stores and one home store, because they are no longer profitable enough. The retailer named William Ackman to its board after the activist investor became its biggest shareholder
As part of the restructuring, J.C. Penney will wind down its catalog business by shutting 19 outlet stores in the course of 2011 and 2012. The retailer will streamline its call center operations and custom decorating business, closing its call center facilities in Grand Rapids, Mich., and Albuquerque, N.M. J.C. Penney will consolidate all activity supporting its department store and online customers into three existing facilities in Columbus, Ohio, Pittsburgh and Milwaukee.
"The actions we are announcing today 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," chief executive Myron Ullman said in a statement.
The stores to be shuttered are located in Morrow, Ga.; West Dundee, Ill.; Des Moines, Iowa; High Point, N.C.; and Culpeper, Va. The home store is in Duluth, Ga.
J.C. Penny is also streamlining its custom decorating business, and will close its custom decorating fabrication facility in Sacramento, Calif., leaving one remaining facility in Statesville, N.C., where it will increase its staffing to support customer demand. Additionally, the company will move from managing 525 individual, in-store custom decorating studios to supporting 300 studios in key markets.
J.C. Penney expects the changes will result in a positive impact to earnings in 2012, the first full year of implementation, of approximately $25 to $30 million. Additionally, there will be estimated one-time charges of approximately $30 million in the fourth quarter of fiscal 2010 and approximately $20 million during 2011 to reflect the transition.
In other news, J.C Penney named William Ackman to its board after the activist investor became its biggest shareholder. Steve Roth will also become a director after his Vornado Realty Trust built a stake in the retailer. Ackman's Pershing Square Capital Management and Vornado together reported a 26% stake in J.C. Penney in early October.