J. C. Penney will start store-closing sales at 154 locations Thursday as the first wave of closures begin slimming down the troubled chain’s sizeable footprint.
The bankrupt retailer said it “expects additional phases of store closing sales will begin in the coming weeks.” The first round of closing sales is projected to last between 10 and 16 weeks, which would have sales winding down around October.
Penney’s on Thursday received bankruptcy court approval on its $900 million debtor-in-possession financing facility, allowing it to access up to $225 million immediately to fund operations. It now has to work on a go-forward strategy to turn around operations and hope that it can get the support of first-lien lenders on a business plan by July 15 that will move it closer to exiting bankruptcy proceedings. After that, Penney’s must secure exit financing by Aug. 15.
“While closing stores is always an extremely difficult decision,” said CEO Jill Soltau, “our store optimization strategy is vital to ensuring we emerge from both Chapter 11 and the COVID-19 pandemic as a stronger retailer with greater financial flexibility to allow us to continue serving our loyal customers for decades to come.”
As of Thursday, the mass merchant has reopened 475 locations that closed in March to curb the coronavirus outbreak. Soltau said Penney’s plans to open more of its stores, while continuing to monitor public health and safety guidelines.
A regulatory filing last month indicated that initial plans for its exit strategy calls for the closure of 242 stores in total, bringing its store network down to 604 from the 846 Penney’s had when it filed for Chapter 11 bankruptcy court protection on May 15.
As the mass chain works with first-lien lenders to negotiate an acceptable agreement on its exit strategy and operations going forward, there’s a chance more than 242 stores might need to be closed. The current plan for a Penney’s Chapter 11 exit has the company splitting into two parts. One entity will be a real estate investment trust to own certain company-owned properties that will be leased to Penney’s. The other entity will run the day-to-day operations of the retail business. The operating arm will also be responsible for paying rent for the stores in locations that will be owned by the REIT. In the meantime, Penney’s is moving forward on new initiatives, including a new private-label home textiles line.