BY Richard Summerfield
JCPenney, one of the largest and most historic clothing and homeware retailers in the US, has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of Texas.
JCPenney had about 846 stores, an e-commerce site and about 95,000 employees around the world, prior to the filing. In response to the COVID-19 outbreak, in March, the company announced the temporary closure of its stores and business offices. Though some of its locations recently reopened, the majority are still closed. Under the terms of the company’s business plan, which was filed with the US Securities and Exchange Commission (SEC), JCPenney plans to permanently close 242 stores, about 30 percent. It has yet to disclose which locations will be shuttered.
The company has reached an agreement with most of its lenders on the turnaround plan that will allow it to stay in business as a more financially healthy company. In a statement announcing the filing, JCPenney confirmed it had approximately $500m in cash on hand as of the Chapter 11 filing date. The company has also received commitments for $900m in debtor-in-possession (DIP) financing from its existing first lien lenders, which includes $450m of new money.
Though the company cited the COVID-19 outbreak for its filing, in reality JCPenney has suffered many years of mismanagement and decline. The company’s most recent profitable year was 2010, and its net losses since have totalled $4.5bn. In 2019, JCPenney suffered a 5.5 percent decline in first quarter sales and was forced to close 27 stores across the country.
“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country,” said Jill Soltau, chief executive of JCPenney. “As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company.
She continued: “Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”
JCPenney became the fourth national retailer to file for bankruptcy in the US in May, following J.Crew Neiman Marcus and Stage Stores (SSI).