JC Penney latest department chain to announce big cuts

JC Penney latest department chain to announce big cuts

JC Penney latest department chain to announce big cuts

As the list of department stores announcing cutbacks and closing grew, one name remained off the list. Sears was imploding, and even Macy’s was struggling, but JCPenney seemed to be faring well. Even after a disastrous campaign that saw the retailer nearly commit suicide through a complete flipping of sales psychology. That idea – no sales and a complete change of looks offered – nearly did the company in, but a new CEO got them straightened out … just in time for the internet to begin the long, slow death of department store retail.

For months, then years, “Penney’s” bucked the trend. Now, finally, JCPenney is starting to bend. A recent news release stated the chain plans to close up to 140 stores and two distribution centers in the next several months … all in the hopes of increasing profitability. While this is certainly bad news for many employees, up to 6,000 will be offered early retirement packages.

It was also a bit of a surprise. Penney’s posted a profit in Q4 of 2016, after a loss in the same period of 2015. Many thought things were looking up. Then they took a second, closer look at the books. As it turned out, profits were up, but total sales were down … again. Stock prices slipped a bit, especially after CEO Marvin Ellison admitted Penny’s wasn’t being strategic enough with their promotions, leading to the trouble with the profit margins. He described the level of couponing as “unhealthy.”

This is an interesting development, considering that it was couponing and sales that lifted the company out of the abyss a few years ago. After Penny’s did away with all sales and went to a “low price on the tag is the price you pay” system, sales plummeted. Shoppers, it seemed, would rather feel like they were saving money than actually save money. It’s weird, but it’s real. When the company did away with the new idea and went back to overpricing clothes then offering deep “discounts,” sales immediately spiked.

Apparently, that model is not actually sustainable. Something Penney’s knew fairly soon. The company tried to cover the gap by increasing its housewares divisions, reintroducing major appliances in their stores. Those ideas increased sales and sent profits inching upward, but it wasn’t enough to save all the stores in the chain. But Penney’s could be on the mend.

Another store that seems to be holding its own is Nordstrom, which, nearly alone among all the major department stores, has managed to find a niche online. Nordstrom Rack is going gangbusters, and that has the whole company in the black and feeling good about better than expected quarterly profits.

The success/fail demarcation is clear. The brands that listened to customers and best adjusted to the new normal in consumer retail sales have done well. Others, who failed to change in time … if at all … are quickly being left behind.

Ronn Torossian is the Founder and CEO of the New York based public relations firm 5WPR: one of the 20 largest PR Firms in the United States.

Ronn Torossian!