Company said coronavirus accelerated its financial restructuring and it will begin closing stores in the next few weeks but no locations were named
PLANO, TEXAS – Just as the Visalia Mall opens up curbside pickup for select companies, one of its largest tenants may not recover from economic ailments due to the coronavirus.
On May 15, J. C. Penney Company, Inc. (NYSE: JCP) announced it had filed for Chapter 11 bankruptcy as part of a plan to restructure about 70% of its debt and reduce its indebtedness by several billion dollars. The corporation filed its motion in U.S. Bankruptcy Court for the Southern District of Texas, in Corpus Christi, Texas.
The company also said it will be accelerating its store optimization strategy to close down stores during the bankruptcy process. The first phase of closures, including specific store details and timing, will be disclosed in the coming weeks, according to a statement released last week. Visalia has staved off national budget cuts before but it is still uncertain how many stores Penny’s plans to close, making the Visalia location a possibility, for now.
JCPenney is welcoming customers back to select stores and continuing to offer its contact-free curbside pickup service at all open stores. The health and safety of associates, customers, and communities remains a top priority, and the Company is gradually reopening stores and offices in a phased approach while following guidance from local and state orders. No California stores were on the list that included 55 locations in 18 states. At the same time, JCPenney’s eCommerce distribution centers continue to fulfill online orders and customer care centers are answering inquiries as usual through its web site, jcp.com.
“The coronavirus pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country. 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,” CEO Jill Soltau said. “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.”
Prior to the unprecedented pandemic, the company said it had made meaningful progress on its “Plan for Renewal” and successfully met or exceeded guidance on all five financial objectives for 2019 and saw comparable store sales improvement in six of eight merchandise divisions in the second half of 2019 over the first half. JCPenney’s “Plan for Renewal” is to improve gross margin, reduce inventory, eliminate inefficient spending, and design an engaging, inspiring shopping experience.
“We have a newly refreshed, highly experienced team of retail executives who remain focused on rebuilding our business and restoring financial strength to JCPenney,” Soltau said. “This team has continued to innovate even during these challenging times, implementing substantial improvements to our flagship eCommerce platform to increase efficiency and ensure our loyal customers continue to have access to the products they need through elevated shopping experiences.”
JCPenney has approximately $500 million in cash on hand as of the Chapter 11 filing date. The company has received court approval for $900 million in financing from its existing first lien lenders, which includes $450 million of new money. This financing, combined with cash flow generated by the company’s ongoing operations, is expected to be sufficient to meet JCPenney’s operational and restructuring needs. As part of the DIP commitment from its existing lenders, JCPenney will explore additional opportunities to maximize value, including a third-party sale process.
“We look forward to emerging from both Chapter 11 and this pandemic as a stronger retailer, continuing to implement our Plan for Renewal, and building capabilities focused on satisfying customers’ wants and needs,” Soltau concluded.
Additional information regarding JCPenney’s financial restructuring is available at www.jcprestructuring.com. Court filings and information about the claims process are available at cases.primeclerk.com/JCPenney, by calling the Company’s claims agent, Prime Clerk, toll-free at 877-720-6576 or sending an email to [email protected]