On may 15, 2020 J.C.Penney (NYSE: JCP) filed for bankruptcy under chapter 11 of the US bankruptcy code. The company plans to reduce debt and strengthen the financial position through restructuring support agreement (the RSA). Its the fourth major retailer and the largest to file for bankruptcy followed by J.Crew, Neiman Marcus and Stage Stores after the health crisis hit the globe. The retail company will permanently close about 850 of its retail stores and furlough around 90,000 of its employee. This filing will help restructure the $4 billion debt that the company has.
JCPenny established in 1902, has been struggling long before the coronavirus pandemic. The company has shown no profit since 2010. The sales have fallen for 4 years straight. Retails sales in the industry have fallen 16.4 per cent in April with clothing sales showing 89% per cent decline.
The revenues for 2019 was $10.7 billion compared to the previous year’s revenue of $11.6 billion, showing a decrease of 8.1%. The net loss from operations continued to increase. In 2017 the net loss was $118 million, $255 million in 2018 and $ 268 million in 2019.
Since January 13, the share price has been below $1. Due to this, the share was delisted from the New York Stock Exchange.
JCPenney has about $500 million in cash on hand as of the Chapter 11 filing date. The Company will seek authorization at its second day hearing to access the $900 million in debtor-in-possession (“DIP”) financing that it received from its existing first-lien lenders. Following the approval of the court, this money with cash generated from operational activities would be sufficient to meet JCPenney’s operational and restructuring needs.
JCPenney’s Transformation Strategy JCPenney has been successfully implementing its Plan for Renewal transformation strategy to improve gross margin, reduce inventory, eliminate inefficient spending, and design engaging, inspiring shopping experience. This plan was announced back in November 2019.
JCPenney has made foundational improvements to:
- Offer Compelling Merchandise
- Drive Traffic
- Deliver an Engaging Experience
- Fuel Growth
- Build a Results-Minded Culture
Though the present market conditions have been challenging, in terms of meeting its operational and financial objectives, the company is focused on returning itself to sustainable, profitable growth.
The company plans to do so by reestablishing the fundamentals of retail, re-envisioning its merchandise offerings, and rolling out new innovations. The company also stated in its press release that it will continue to gather customer feedback and make improvements that enhance the shopping experience throughout this difficult time and over the long-term. The Company had made meaningful progress on its Plan for Renewal and successfully met or exceeded guidance on all five financial objectives for 2019, prior to the Coronavirus (COVID-19) pandemic.
The company will continue its operations, offering contact-free curbside pickup. It will also continue to fulfil online orders through its eCommerce distribution centres and the customer care centres would tend to customer inquiries as usual.
Jill Soltau, chief executive officer of JCPenney stated “We have a newly refreshed, highly experienced team of retail executives who remain focused on rebuilding our business and restoring financial strength to JCPenney. This team has continued to innovate even during these challenging times, implementing substantial improvements to our flagship eCommerce platform to increase efficiency and ensure our loyal customers continue to have access to the products they need through elevated shopping experiences.”
JCPenney plans to get back in the business stronger, and more evolved. But given the current situation, it is hard to tell if people would feel safe while retail shopping and whether they would consider JCPenney when it comes to eCommerce over already established eCommerce giants. Only time can tell if JCPenny can carry out its hundred years old legacy and emerge stronger.