Revelation 6:5-6 — Depression. Prosperity in the midst of great scarcity.
Article By: Maria Halkias
J.C. Penney said Friday it will close 138 stores across the U.S. and is leaving some smaller markets where it’s operated stores for decades. With its remaining 876 stores, Penney will still have at least one location in 49 states and Puerto Rico.
The list includes nine stores in Texas, but none in Dallas-Fort Worth. The Texas stores are in mostly smaller markets: Athens, Borger, Early, El Paso, Marshall, McAllen, Nacogdoches, Seguin and Stephenville. Some expected Collin Creek Mall in Plano to close because Macy’s is in the process of closing its store there now, but it will remain open.
Penney’s original store in Kemmerer, Wy., at 722 JCPenney Drive isn’t on the list and will remain open. Penney said last month that it would be closing about 13 percent of its stores that were unprofitable and generated only a combined 5 percent of sales. The stores are expected to close in the second quarter, which ends in July for Penney. Most liquidation sales will begin on April 17, the company said.
The states with the biggest number of closings were Texas, Minnesota, Michigan, Illinois, North Carolina, Wisconsin and Pennsylvania. Hawaii is the only state that doesn’t have any J.C. Penney stores. Three stores are closing in Louisiana and four in Oklahoma.
Most of the stores in this batch are either in the range of 47,000 to 70,000 square feet or even smaller at 10,000 to 30,000 square feet.
Houston-based Stage Stores is likely to benefit from Penney’s small store closings. The 834-store chain mostly operates in small towns in 39 states with several brands including Bealls, Goody’s and Palais Royal. Its stock price gained more than 6 percent on Friday, but even though Wall Street has been pushing Penney for sometime to close stores, Penney shares fell by 17 cents, to close at $5.99 on Friday.
“I just found out Penney’s is closing,” Neal said. “It’s been a fixture at the mall and we hate to see them go. We’re a small town with a limited population and a limited attraction to the big box retailers.”
But it was “very convenient” to have Penney in the market, he said, noting he was just there last week to buy his son some new school uniforms.
“I guess now we’ll go to Shreveport or Longview. But we hope they would stay.”
In Athens, the Penney store is in the same center with a Bealls store.
“It’s always hard for a small town to lose a big box retailer because of the jobs,” said Lisa Denton, executive director of the Athens Economic Development Corp. “But we’ve had some good success with industrial employers, and we think the displaced employees can find jobs.
The city hired a retail consultant almost a year ago to help fill in the gaps in retail and restaurants for new residents moving in to work for manufacturing employers that the city has attracted, she said. “There’s interest in the Penney location.”
About 6,000 employees have more time to respond to an voluntary early retirement offer. The original deadline of today was extended to March 31. Penney CEO Marvin Ellison said last month that the timing of the offer was intentional to open up jobs in stores for the 5,000 people losing positions in the locations that are closing. Penney is also closing one distribution center in Lakeland, Fla., and relocating one supply chain facility in Buena Park, Calif.
For Penney, the closings shift resources to more profitable stores. Penney has been investing in its e-commerce business and Ellison is a strong believer that stores are a key part of the whole shopping scene going forward. Last year, about 75 percent of all online orders touched a physical store, he said.But the stores closing, Ellison said, needed significant capital to reach the company’s new brand standards and didn’t have the sales performance to justify the spending.
The closings obviously put malls already losing customer traffic in worse shape, but that seem inevitable. Macy’s is in the process of closing 68 stores in some of the same malls with Penney. Two Macy’s stores are in North Texas and are in the process of closing at Southwest Center Mall in Dallas and Collin Creek Mall in Plano. Sears, which also owns Kmart, is closing 150 stores between the two brands.
Most of these small towns have a Wal-Mart for sure and a Target not too far away. The discount chains have weakened the small town department stores over the years, said Frank Mihalopoulos, owner of Dallas-based Corinth Properties and a redeveloper of worn out malls. But as long as these shopping centers are in good locations, there’s an alternative use for them. He’s working on a mall in Wisconsin that lost both its Sears and Penney, but it’s a good spot for a supermarket.
“Department stores are taking advantage of the current environment,” Mihalopoulos said. “It’s a new normal and more acceptable today to go ahead and close your unprofitable stores.”
It’s not just department stores that are closing in the weakest malls. In recent months, hundreds of smaller stores including The Limited, BCBG, Wet Seal, Lucy Activewear, Croc’s and others have closed hundreds of stores.
Morningstar Credit Ratings said earlier this month that Penney’s store closings could impair almost $30 billion in commercial mortgage-based securities attached to malls across the U.S.
The report also noted that the Macy’s, Penney and Sears closings are also continuing the bifurcation in the market where lower quality, Class B malls, particularly in smaller markets, continue to lose tenants and cash flow. At the same time, higher quality, Class A malls, are being improved and are getting their owners’ investment dollars to broaden the properties appeal.
The largest real estate investment trusts own malls with 291 of Penney’s 1,014 stores, but more than 700 Penney stores are in malls owned by smaller operators who may find it more difficult to backfill any vacancy, according to the Morningstar report.
Consumers are less brand-sensitive in apparel purchases than in the past, which should help lower priced retailers like Penney, but it has to have the right merchandise in a hugely competitive and what many believe is an over-stored women’s apparel business.
Ellison said last month that new private label brands in the plus sizes have worked but the rest of women’s apparel lagged behind last year. Penney has several efforts underway from the addition of Nike shops, adding more Sephora and kitchen and laundry appliance departments to new partnerships with suppliers of flooring and furniture, home remodeling and heating and air conditioning installers.
The disruption happening in the retail business is huge. Penney is a 114-year-old company trying to reinvent itself for the changing spending habits of consumers that includes more attention to their homes and less about their wardrobes.
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