Dive Brief:

• J.C. Penney plans to cut 1,000 jobs following previously announced plans to close 152 stores while in Chapter 11, the company said Wednesday in a press release.
• The workforce reductions will cover corporate, field management and international positions. Penney said that the cuts would "create a smaller, more financially flexible company, and will help ensure JCPenney emerges from both Chapter 11 and the Coronavirus (COVID-19) pandemic as an even stronger retailer."
• Also on Wednesday, Penney kicked out a deadline for lender approval of a go-forward business plan, a key milestone to Penney's progress through bankruptcy and hopes for reorganization. The deadline for approval was originally set for Wednesday, but Penney and its lenders pushed the deadline to July 31, according to court papers.

Dive Insight:

J.C. Penney entered bankruptcy in mid-May with 850 stores — way more than what some analysts thought the ailing department store retailer should be running amid a protracted decline in mall retail. When the retailer filed for Chapter 11, it said it planned to close up to 240 stores, and so far has eyed the closure of 150.

This shrinking is standard for a retailer in bankruptcy. After all, one of the advantages of the court process is being able to make quick exits from leases and stores that have become unprofitable or are on a downward trajectory. And with Penney's sales on the downward slope for years, it has little choice but to get smaller in proportion to its dwindling customer base. 

The department store retailer has been in turnaround mode for the better part of a decade now. Changes both large and small at Penney, under multiple CEOs — everything from an end to sales promotions to stocking heavy appliances to tweaks in apparel merchandising — so far haven't proved enough to stabilize Penney's sales or excite customers to any significant degree.

Chapter 11 is an opportunity for the retailer to get smaller in a hurry, jettisoning debt and its weakest stores, which unfortunately for workers also means layoffs, with fewer stores in need of corporate support. (The company is offering benefits to departing employees, including COBRA health coverage and payment for unused PTO days, among others.)  

The retailer's stated aim in bankruptcy is to emerge healthier. "As the retail landscape continues to evolve, we will continue to make thoughtful and strategic choices to Offer Compelling Merchandise, Drive Traffic, Deliver an Engaging Experience, Fuel Growth, and Build a Results-Minded Culture to ensure that JCPenney remains at the heart of America's communities for decades to come," CEO Jill Soltau said in Wednesday's release, referring to the linchpins of the retailer's turnaround strategy. 

But first, the retailer has to get buy-in and support from key lenders and other stakeholders. A failure to come to an agreement on a go-forward business plan could trigger a number of scenarios given the terms of its bankruptcy loan (known as debtor-in-possession financing), including, potentially, liquidation.

Another possibility would be the sale of the company to a third party, with previous reports of interest in Penney by the private equity firm Sycamore Partners as well as mall giant Simon Property Group, among others.  

Time for the retailer to hash out a plan for its future gets shorter by the day. The coming weeks will be critical.