J.C. Penney is planning to file for bankruptcy in the next day, people familiar with the matter tell CNBC.
Its advisors are currently working on a bankruptcy filing that could come late Thursday night or early Friday morning, they said. They cautioned there is still a chance that final negotiations between the retailer and its lenders spill into the weekend and delay the filing.
J.C. Penney employed roughly 90,000 full-time and part-time employees as of February. It is working on a plan that would contemplate closing 180 to 200 stores while in bankruptcy. The retailer had 846 department stores as of February.
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The Plano, Texas-based retailer is planning on filing for bankruptcy in Corpus Christi, Texas, the people said. It has been negotiating with its first lien lenders a $450 million loan to finance the bankruptcy, which would require the troubled retailer to hit certain goals to receive the second half of it, CNBC previously reported.
Because it is working so quickly to finalize its bankruptcy documents, it may not get them all done in time to draw from the initial funds its first day in bankruptcy. As such, it may need to wait until a June 2 court hearing to begin drawing from the loan, the people said.
The people requested anonymity because the information is confidential. A spokesperson for J.C. Penney declined to comment.
In filing for bankruptcy, J.C. Penney will join fellow department stores Neiman Marcus and Stage Stores as victims of the pandemic, which has forced their doors shut but whose ailments far predated the virus. Department stores have struggled to maintain a foothold in U.S. retail, as brands sidestepped them by selling to shoppers directly, and shoppers have abandoned the mall in which many are based.
Sales at J.C. Penney have fallen annually since 2016. Its roughly 846 store footprint is less than a quarter of its store base in 2001, and its nearly $11 billion in sales the last fiscal year are almost a third of its sales that year.
The retailer dates back to 1913, when James Penney converted a chain of 34 stores into the J.C Penney company. J.C. Penney offered rural America their first depot, providing farmers and others a one-stop-shop to buy essential goods at bargain prices. The retailer broke ground by eschewing credit, based on Penney’s belief it is better to charge customers what they could afford without them having to take on debt.
By 1928, it worked its store base up to 1,000 stores – a year before the company went public, and the Great Depression.
In the 1960s, it sets its eyes on suburban America and headed to the mall, where suburban America was shopping. It pushed into affordable fashion, which it promoted in 1,000-page catalogs it launched 1963, decades after then-rival Sears had come out with its own.
By 1994, the retailer had $20.4 billion in retail sales, with net income nearing $1 billion.
In later years, though, it struggled to compete against Walmart’s rise. As a department store, it never quite caught up to Macy’s. When activist investor Bill Ackman disclosed a stake in the company in 2010, he believed he could cement the retailer’s role as a department store power player.
Ackman joined the board and brought in Ron Johnson, who previously oversaw Apple’s retail division, as CEO. Many of Johnson and Ackman’s ideas, like creating "store-within-a-store" concepts proved visionary, but they were rolled out too quickly, analysts said at the time. Customers abandoned the retailer. J.C. Penney reported a nearly $1 billion loss during Ron Johnson’s first full year in the role.
Johnson eventually stepped down, and J.C. Penney took out a $2.25 billion loan to shore up its finances.
Over the next decade, J.C. Penney has fought to stabilize its balance sheet, all the while competing with changes in shopping behavior as Americans abandoned the mall.
It brought in Jill Soltau, former CEO of Jo-Ann Stores in October 2018. Soltau had begun to try to revitalize J.C. Penney and bring it back to its roots: focusing on customer service, apparel and low prices.
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