It looks like there are more store closures looming in J.C. Penney’s future.
The department store chain on Tuesday said it would be closing three locations by this spring, as it continues to evaluate its real estate. It didn’t disclose the addresses of those three stores or how many additional stores it planned to close in 2019, but said it would offer more information in its next earnings report slated for Feb. 28.
With more than 860 Penney shops scattered across the U.S. today, analysts agree there’s more trimming to be done. One says that could amount to more than 100 additional locations going dark.
Penney should close up to 125 more stores, according to Cowen & Co. analyst Oliver Chen, to get to a healthier fleet. He said he’s been encouraged by stronger performance by the department store chain in jewelry and women’s apparel of late, but Penney’s home business hasn’t been as strong.
As Penney shuts more stores, it will need to — importantly — make sure it recaptures those stores’ customers at other locations or online so it doesn’t risk losing them entirely, Chen added in a note to clients.
A J.C. Penney spokeswoman said the company wouldn’t comment about additional store closures beyond what it said on Tuesday.
Aside from now bankrupt Sears, Penney is struggling more than its department store peers heading into 2019. Its stock sank under $1 for the first time ever last month. It’s struggling to sell trendy apparel and instead has had merchandise pile up to the point where it’s had to use deep discounts to try to move products off shelves. Its profits have taken a hit as a result. But the company does say it plans to end fiscal 2018 by reducing inventory by more than $225 million, or 8 percent. With a new CEO, Jill Soltau, at the helm, the retailer is still trying to turn things around.
Telsey Advisory Group analyst Dana Telsey said it’s “encouraging” Penney is “making progress on its shrink issue,” based on the inventory outlook released on Tuesday. Penney’s holiday sales declines — though unfortunate — were relatively in-line with what her firm was predicting, Telsey said. She added she expects 20 to 30 more Penney stores could be shut in 2019.
Meanwhile, the verdict is still out for how Penney will benefit — if at all — from Sears going bankrupt, shutting stores and now inching toward liquidation.
The company has said it hasn’t seen Sears’ bankruptcy show up in any “material” way in its earnings results, yet, according to Gordon Haskett analyst Chuck Grom. He recently met with Penney’s management team at its Plano, Texas, headquarters.
Grom estimates that, should most Sears and Kmart stores go dark, Penney would get a bump in same-store sales of as much as 3.5 percent.
Grom also said he expects Penney’s fourth-quarter same-store sales to be better than the holiday sales declines reported this week, “particularly if the company looks to deepen its inventory clean-up efforts.”
Penney shares have fallen more than 66 percent over the past 12 months, bringing the company’s market cap to under $400 million. The stock once traded as high as $87.18 on Feb. 21 2007, but Wednesday was around $1.30.