J.C. Penney Files For Bankruptcy As Lockdowns Take Their Toll | New Hampshire Public Radio

J.C. Penney Files For Bankruptcy As Lockdowns Take Their Toll

May 16, 2020
Originally published on May 16, 2020 7:28 am

In its 118-year history, J.C. Penney has gone from a Wyoming-based dry-goods store to being a key pillar of the American mall.

But like many malls across the country, J.C. Penney has been struggling for some time. The coronavirus lockdowns finally took the department store over the brink. The company said Friday that it's filing for bankruptcy and plans to close some of its stores "in phases," the timing and scale of which will be disclosed "in coming weeks."

It's the latest — and likely not the last — retailer whose existing problems led them into bankruptcy during the pandemic, as clothes shopping has fallen off a cliff and the U.S. economy careens into a recession. In April, clothing purchases dove 79% amid a record 16.4% drop in overall retail sales.

Preppy retailer J.Crew and luxury department store Neiman Marcus were the first to turn to Chapter 11 proceedings to renegotiate their debt loads amid the coronavirus. Sears, J.C. Penney's historic rival, went into bankruptcy in 2018.

Promising fashion and housewares on a budget, J.C. Penney was once described by a New York Times critic as the "perennially square department store." It has been caught in a years-long cycle of financial losses, ever searching for an identity and a popularity boost.

The retailer currently has some 850 store locations and 90,000 employees. In a statement, CEO Jill Soltau said the company hopes to emerge from bankruptcy as a leaner, smaller operation.

"Implementing this financial restructuring plan through a court-supervised process is the best path to ensure that JCPenney will build on its over 100-year history to serve our customers for decades to come," she said.

Indeed, J.C. Penney began 2020 with hopes of yet another turnaround.

Under Soltau, the company appeared on track with the latest revival plan. The retailer pinned some of its hopes on new negotiations with suppliers and landlords and the latest store redesign, with space for workouts, haircuts and coffee breaks. The company also ditched appliancesyet again — and even dipped its toes into selling used clothes.

But the coronavirus pandemic has disrupted J.C. Penney's plans as it forced malls and nonessential stores to shut for weeks. Already facing declining sales, the company in April missed a $12 million interest payment on its amassed debt.

Founded in 1902 by a man with an unlikely name of James Cash Penney, J.C. Penney has lived through many cycles of headlines about its looming demise — and promises of a revival.

In the 1980s, J.C. Penney cut an ill-fated but revolutionary deal for high-end superstar Halston to design affordable fashions for the masses. In the 1990s, J.C. Penney dominated with a massive catalog operation and became one of the early stores to begin selling on the Internet. In the mid-2000s, it struck a formative partnership with cosmetics company Sephora.

In the 2010s, J.C. Penney taught one of retail's biggest cautionary tales with the high-fanfare hire of Apple's retail chief Ron Johnson as CEO. Johnson promised J.C. Penney a radical transformation with an appeal to younger shoppers. But his aggressively fast changes — which included abolishing discounts and sales — alienated loyal shoppers, costing J.C. Penney nearly $1 billion.

Its more recent history of store closures, job cuts and more recalibrations has helped turn venerable J.C. Penney into a penny stock. Since January, the company's shares have been valued at less than $1.

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J.C. Penney, a mainstay of the suburban mall, has filed for bankruptcy. The retailer began the year with hopes of yet another turnaround. Instead, coronavirus shutdowns across the country tipped the struggling department store over the brink. NPR's Alina Selyukh reports.

ALINA SELYUKH, BYLINE: In its history spanning over a century, J.C. Penney went from a Wyoming-based dry goods store to a key pillar of the American mall. Promising fashion and housewares on a budget, J.C. Penney was once described by a New York Times critic as the perennially square department store. It has been caught in a years-long cycle of financial losses, ever searching for an identity and a popularity boost.

CHRISTINA MOON: J.C. Penney is that kind of quintessential suburban, aspirational middle-class department store.

SELYUKH: Christina Moon is a fashion studies professor at the Parsons School of Design.

MOON: It's like the pre-Ikea. You go in with your family. You spend a Saturday. They wander off. You're imagining this kind of middle-class life this store can bring you. J.C. Penney definitely had that moment.

SELYUKH: Founded by a man with an unlikely name of James Cash Penney, J.C. Penney has lived through many cycles of headlines about its looming demise and promises of a revival. Its biggest one in the 2010s taught one of retail's biggest cautionary tales, when J.C. Penney hired a new CEO with huge fanfare. Ron Johnson was going to make J.C. Penney hip. He came from Apple, where he was the retail chief. Part of his plan involved abolishing sales and discounts, arguing they were confusing, a pain, leading to this cringeworthy commercial featuring shoppers screaming over coupons.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR #1: (As character, screaming).

UNIDENTIFIED ACTOR #2: (As character) No. No.

SELYUKH: That botched transformation cost J.C. Penney nearly a billion dollars.

TASHA LEWIS: And it alienated the longtime customers that they were never able to really get back.

SELYUKH: Tasha Lewis teaches fashion design management at Cornell University. The company's share price kept falling. And, eventually, the venerable J.C. Penney became a penny stock, shares worth little to nothing.

LEWIS: It was too much too fast. And I think that sent the customer in a different direction. It's sort of been on a trajectory of trying to figure out its identity. But it sort of seems to be a combination of starts and stops.

SELYUKH: A round-robin of executives changing focus - appliances for a while, now fashion and makeup - falling popularity of malls overall, debt, store closures, then, during the coronavirus lockdowns, a record wipeout of retail sales that devastated clothing and department stores. Now J.C. Penney is the biggest retailer yet following J. Crew and Neiman Marcus into bankruptcy during the pandemic.

Moon points out J.C. Penney's historic rival Sears declared bankruptcy two years ago.

MOON: I'm really, to be frank and honest, very shocked that it's actually held on for this long.

SELYUKH: J.C. Penney now says it hopes the bankruptcy will let it hold on for decades to come. The company does plan to permanently close some of its stores, quote, "in phases." The timing and scale of these phases will be disclosed in the coming weeks.

Alina Selyukh, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.