Coronavirus pushes J.C. Penney into Chapter 11 bankruptcy. Some stores will close for good
J.C. Penney, one of the nation’s largest retailer and an anchor tenant at all of Sacramento’s major shopping malls, announced Friday that it will be seeking Chapter 11 bankruptcy relief.
The Plano, Texas-based company, like many legacy brick-and-mortar retailers, has been struggling to keep up with internet giants like Amazon over the past several years, but cited the coronavirus pandemic as a major push toward bankruptcy.
J.C. Penney stock prices have followed a downward trajectory since 2012, but took a precipitous slip in January this year, as news of the pandemic began to spread. By mid-May, a single share was worth about a quarter, compared to more than $80 at the company’s prime in 2007.
“Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy — and our efforts had already begun to pay off,” J.C. Penney CEO Jill Soltau said in a prepared statement. “While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”
As of filing for Chapter 11 bankruptcy, the company had about $500 million in cash on hand, but owed unsecured debts worth several billions of dollars. Its annual SEC filings indicate that its total long-term debts was about $3.5 billion in 2019, down from $3.7 billion in 2018.
In 2019, the company netted $10.71 billion in sales, down from $11.66 billion in 2018, according to SEC filings.
With declining sales and mounting debts, the company sought bankruptcy protection to manage through the unexpected crisis posed by the pandemic — but there will be lasting consequences.
As part of J.C. Penney’s restructuring agreement, the company will be closing some stores in order to “better align its business with the current operating environment,” a company statement said. The exact stores have yet to be specified, and will be closed throughout the Chapter 11 process.
“The American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company,” Soltau said. “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.”
J.C. Penney outlets can be found in the Arden Fair mall in Sacramento, the Sunrise Mall in Citrus Heights and the Westfield Galleria in Roseville. The Sunrise Mall has experienced particularly troubling sales and tenancy rates in recent years, while the other two malls have fared better.
The stores have been closed to in-person shopping for several weeks due to the pandemic, although the company does offer curbside pickup for online orders.
J.C. Penney runs about 850 stores across the United States and Puerto Rico and employs about 95,000 people.