J.C. Penney to close nearly 140 stores as revenue continues to fall

J.C. Penney is facing the music—but it’s trying to make the tune cheerful.

On Friday, the retailer announced that in coming months it will close 130 to 140 stores, roughly 14 percent of its locations.

The company plans to offer early retirement packages to about 6,000 of its eligible employees, which it hopes will offset layoffs associated with the closings.

The decision comes as the company announced that its sales continue to decline.

Fortune reported:

The announcement came as Penney (JCP, -5.25%) reported a 0.7% decline in comparable sales for the holiday quarter, the third period out of four last fiscal year to see business soften. The results are a setback for a retailer that had been coming back from the brink after an ill fated attempt to be hipper in 2012.

Penney, which operates about 1,000 stores, had halted store closings last year, saying that its physical stores were essential to supporting its e-commerce, given that about one third of orders are shipped from, or picked up in a store. (Earlier this week, Kohl's said it would shrink rather than close stores for that reason.)

The company hopes that it can boost sales numbers by making its remaining stores more appealing to customers.

[RELATED: White paper: How to break bad news to staff and take tough questions head-on.]

In a press release—which was laden with phrases like “growth experience,” “omnichannel experience” and “last-mile delivery cost”—J.C. Penney’s chief executive, Marvin Ellison, said closing the stores would enable the company “to raise the overall brand standard”:

"In 2016, we achieved our $1 billion EBITDA target and delivered a net profit for the first time since 2010; however, we believe we must take aggressive action to better align our retail operations for sustainable growth. During the year, it became evident the stores that could fully execute the Company's growth initiatives of beauty, home refresh and special sizes generated significantly higher sales, and a more vibrant in-store shopping environment," said Marvin R. Ellison, chairman and chief executive officer of JCPenney. "We believe the relevance of our brick and mortar portfolio will be driven by the implementation of these initiatives consistently to a larger percent of our stores. Therefore, our decision to close stores will allow us to raise the overall brand standard of the Company and allocate capital more efficiently."

Ellison also said the move would help the company stay competitive with online retailers, which are grabbing bigger slices of the consumer shopping pie.

In the press release, the chief executive said the company is trying to marry e-commerce with the brick-and-mortar shopping experience and that its new store model “meets the expectations of a digital world”:

"We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers. Maintaining a large store base gives us a competitive advantage in the evolving retail landscape since our physical stores are a destination for personalized beauty offerings, a broad array of special sizes, affordable private brands and quality home goods and services. It is essential to retain those locations that present the best expression of the JCPenney brand and function as a seamless extension of the omnichannel experience through online order fulfillment, same-day pick up, exchanges and returns," said Ellison.

"While many pure play e-commerce companies are experiencing dramatically increasing fulfillment costs, we are pleased with the double digit growth of jcpenney.com and how leveraging our brick and mortar locations is enabling us to offset the last-mile delivery cost. We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimize the growing operational costs of delivery. In fact, in 2016 approximately 75% of all online orders touched a physical store. Even with a reduced store count, JCPenney is competitively positioned to deliver a differentiated department store model that meets the expectations of a digital world with an inspiring, tangible shopping environment," Ellison added.

The decision to shutter selected locations also comes after other retailers, including Macy’s, have closed stores. As retail chains face increased competition from online retailers and lower revenues, PR and marketing pros can expect to see more moves by retailers to combat shrinking profits.

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