JC Penney closes more stores after a weak holiday season

NEW YORK (AP) – JC Penney is closing more stores following weak holiday sales season for the retailer.

Net income tumbled nearly 70 per cent, and a key measure for health dropped four per cent in the fourth-quarter, the most crucial period of the year for retailers who bank on strong holiday sales.

The company’s did top expectations for the fourth quarter results and under new CEO Jill Soltau, the department store rid itself of unprofitable inventory and said it will have positive free cash flow this year.

Shares jumped more than 22 per cent on Thursday.

Soltau, who came on board last October, faces numerous challenges in avoiding the fate of Sears or other retailers that have filed for bankruptcy protection, or vanished.

Under Soltau, jettisoned major appliances which accounted for 2.7 per cent of JC Penney’s sales last year, but dragged on the company’s operating profit.

It’s focussing instead on women’s clothing, and goods for the home like towels or bedsheets, which carry higher profit margins. Furniture is still available, but only online.

File photo shows the JC Penney logo outside the Manhattan mall in New York. – AP

That reverses the course followed by predecessor Marvin Ellison, who three years ago began selling major appliances again in an attempt to capitalise on problems at Sears.

In a conference call on Thursday, Soltau said she has spent time with customers, suppliers and workers and she said she’s convinced that the company can establish a path of “sustainable profit growth.”

Changes will be swift, methodical and based on what customers want and expect from JC Penney, Soltau said. “This is not business-as-usual,” she said during a conference call on Thursday. “Our current reality is clear.”

Department stores like JC Penney are trying to reinvent themselves in an era when Americans are buying more online, or turning to discounters like TJ Maxx for clothing.

Bringing back shoppers is has proven exceedingly difficult, even for iconic brands.

Momentum appears to be slowing at Macy’s, which released fourth-quarter results this week. It reported weaker profit and total sales, as well as meager growth in sales at established stores, a key measure for a retailer’s health.

Nordstrom reported late Thursday that its fourth-quarter profits surpassed Wall Street expectations but had a sales shortfall. Kohl’s reports next week.

Among the four stores, only Kohl’s has seen its stock move higher over the past 12 months, but just barely. Shares of Sears and JC Penney are down more than 60 per cent in the past year.

And the path back to prosperity appears especially tenuous for JC Penney. It is trying to claw its way back after a disastrous reinvention plan in 2012 by its former CEO Ron Johnson, who dramatically cut back on promotions and brought in new brands to attract young shoppers.