J.C. Penney cutting 670 jobs, closing distribution center

Dive Brief:

As part of an effort to align its supply chain network and customer care operations with the future needs of the company, JCPenney will be closing its Milwaukee distribution and customer care center beginning this summer, with some operations transferring to other facilities in Lenexa, KS and Columbus, OH, the company told Retail Dive in an email.
The retailer will transfer the customer care activities from Milwaukee to a center in Lenexa, the company said. The distribution center portion of the Milwaukee facility will cease operations on July 1, and the customer care center will close on Sept. 1, according to a company spokesperson.
The move will entail the loss of 670 jobs, he said.

Dive Insight:

Penney's is apparently joining Amazon and Walmart in taking steps this week to right-size operations; in its statement to Retail Dive on Wednesday that company said that its supply chain network is "oversized relative to its national store footprint." It's not clear, but J.C. Penney's statement, which said the retailer is aligning its supply chain with "future" needs could mean that more changes are imminent.

"It’s never easy taking actions that directly impact our valued associates, however, we feel this is a necessary business decision," the spokesperson said. "Eligible associates will receive separation benefits, including outplacement support and an on-site career training class. The class will assist associates in writing resumes, filling out applications, answering interview questions and more."

The retailer is under pressure, and closed out the year in some turmoil, letting go of longtime chief merchant John Tighe (in fact axing that position completely) in order to "streamline decision-making and promote greater agility within its merchandise buying teams." Earlier in the year the company attempted a drastic reset and swept away much of its women's inventory as it warned of a critical sales slump in the third quarter. The company did manage to beat estimates from analysts and itself, however: Q3 revenue grew to $2.90 billion from $2.76 billion, and same-store sales grew 6.4%, topping FactSet analyst estimates of a 5.7% increase. CEO Marvin Ellison said Q3 gross margins and earnings "exceeded our expectations,” and even apparel sales improved.

The holiday period was even brighter, as same-store sales rose 3.4%. But the higher traffic and same-store sales rise at the holidays may not be sustainable, GlobalData Retail analyst Anthony Riva warned in an email to Retail Dive last month. "[The holiday sales] show that the retailer can succeed if it is able to draw people into stores and online," he said. "However, as customer traffic drops back to normal levels, the chances of sustaining this performance do not look favorable," Riva warned. "JCP has a lot more work to do in reenergizing its proposition across 2018 to give people reasons to visit."

In the long-run, J.C. Penney and its peers face steep existential challenges. Mass merchants have been cutting into their share for years. Amazon and other online players have been stealing apparel sales. And off-price sellers have been growing, as customers seek out steep discounts and "treasure hunt" thrills. That growth has and will likely continue to come at the cost of department store sales, including at J.C. Penney, which likely means that 2018 will be something of an uphill climb for the retailer.