JC Penney Files For Chapter 11 Bankruptcy Protection

[cjd]

No department store is doing all that well right now. I don't understand why Belk would want JCP. Most Belk stores are in the same malls as JCP so basically they'd be ending up like Winn-Dixie did when they bought Sweetbay or to a more similar situation, when Sears bought Kmart. Only in this case it's even more extreme because there are likely more JCP and Belk sharing a mall than there were Sears and Kmart being Kmart wasn't in that many malls.

Belk would not do well as a northern or western area, I don't think. They would be stretched too thin, and I'd imagine a good number of these JCP stores they would end up with are run down places that need too much work to bother converting over. Belk couldn't afford all the conversions let alone making them upscale. They'd have to come up with a whole separate product line for each region's weather and style. Some Belk stores need work and are dated but I bet most of them are nicer than a lot of 40-50 year old JCP stores are.

[Super S]

Belk is an unknown name in many areas, while JCPenney still is a recognizable national brand. They will risk alienating even more customers with a name change, something JCPenney does not need right now. Belk would have to offer something extraordinary to pull this off. For some reason it reminds me of the downfall of Haggen a few years back.

[storewanderer]

Belk would about double its size. Haggen tried to do an 8 times multiple expansion. I've looked at a lot of Belk store photos and they look nice. Much nicer than JCP. They also look empty of customers... Culturally I am also not sure they would be a good fit.

[SamSpade]

The Mother Store could maybe be saved by someone like this foundation:

► Show Spoiler

https://kemmerergazette.com/article/ren ... nney-house

A few years ago the foundation along with staff from Plano fixed up the James Cash Penney home that is in Kemmerer.

Note, I don't know if this foundation would be like the Albertsons - Safeway foundation and tied to the company.

[pseudo3d]

No department store is doing all that well right now. I don't understand why Belk would want JCP. Most Belk stores are in the same malls as JCP so basically they'd be ending up like Winn-Dixie did when they bought Sweetbay or to a more similar situation, when Sears bought Kmart. Only in this case it's even more extreme because there are likely more JCP and Belk sharing a mall than there were Sears and Kmart being Kmart wasn't in that many malls.

Belk would not do well as a northern or western area, I don't think. They would be stretched too thin, and I'd imagine a good number of these JCP stores they would end up with are run down places that need too much work to bother converting over. Belk couldn't afford all the conversions let alone making them upscale. They'd have to come up with a whole separate product line for each region's weather and style. Some Belk stores need work and are dated but I bet most of them are nicer than a lot of 40-50 year old JCP stores are.

Supermarkets are a little different because of pretty major overlap in offerings, with the real rub being perishables, operations, and pricing. They can literally apply new price tags on everything to change brands, banners go up, and perishables change, but life goes on.

Department stores aren't like that, they have wildly different merchandise mixes and specific customer bases. Macy's really ruined itself when it converted the regional department store names, turning it practically overnight (well, in the course of a few years, but for several regions, it was instant) from a relatively "nice" store in urban areas to a middle market store with a wildly different customer base.

Sears and Kmart made some sense because Sears was experimenting with lower-end big-box stores (both Grand stores and a few stores carved out of former regular Wal-Mart stores), a possible future could've been dividing out slowly easing out Kmart in favor of Sears stores (and despite some pretty terrible execution, was a direction they seemed to want to go to), and then looked to the future.

In the case of Belk and JCPenney, they have nothing to gain from combining. They won't gain new customers, they don't really have enough money to remake the chain (Sears actually did....until Lampert and Co. wasted/stole it all), and they don't really have enough ideas. If JCPenney is to survive, it needs to hitch off a larger retailer that can use its soft goods and department stores to enter something new. I can see Walmart buying JCPenney as some sort of bid to use it as a "nicer" store to go into areas that wouldn't allow Walmart otherwise (and re-merchandising JCPenney to have more of what Walmart sells, like adding back toys and other hard goods).

[buckguy]

Belk may get the most affluent people in their many small markets, but that doesn't support upper-middle retail. They're a mid-market store overall and their efforts to go more upscale with their "flagship" stores hasn't been very successful. These were mostly former Parisians and they've closed a number of them, most recently Phipps Plaza in Atlanta. Their reputation/image as a small town retailer has been a barrier to being successful in larger markets. They had tried and failed in Atlanta at least once before. The small town malls where they have located probably are dying faster than those in metro areas---people who want to do serious shopping will drive an hour or two to the nearest megamall, also do the nearby big boxes, and make a day of it. Belk needs a strategy for growth and the JCP stores most likely would bridge their many small markets and their small number of larges ones like Charlotte and Birmingham by enabling them to enter second tier and larger markets in the Southeast where they don't have stores now. This would make them more of a direct competitor with Dillard and Macy and their ability to go beyond their small town, mid market niche and overcome their problems being something else. I doubt that private equity will be patient enough for the time it may take to make this work.

BTW, Department stores have always had a lot of overlap and it became greater when they moved to the suburbs and weren't always able to scale the exclusive merchandise and special departments that defined their identity downtown. They might sell some different brands to paper over the differences, but the price point overlap between a lower middle-brow May-type store and an upper-middle brow ADS chain might still have been about 80%--this is actually pretty well documented if you look. The major exceptions were true high end chains, but outside of the "national" chains, these stores often struggled because they really only worked in a small number of locations and the local/regional high ends died out in the 80s. Macy mostly wound up with mid-market stores because.most of the May chains and a lot of the Federated stores fit that profile. Outside of bungles like Marshall Field's they really didn't change much. The old banners are mostly an exercise in nostalgia, between centralized buying, consolidation and suburbanization, most the banners hadn't meant much in decades.

[Super S]

More JCPenney closings are trickling in, including the newer standalone location in Vancouver, WA which was not part of the earlier announcement:

https://www.columbian.com/news/2020/aug ... -closures/

I am not surprised though. Some time in the last couple years this property was on the market. I would say this would be a good location for Kohl's but they already have a relatively new location about a mile west.

[SamSpade]

J.C. Penney to be bought by its biggest landlords, Simon and Brookfield

Wells Fargo has agreed to extend Penney $2 billion in revolving credit and when the transaction is completed, Penney will be left with $1 billion in cash.
More than 70,000 jobs may be saved by the transaction. Penney has already closed almost 150 stores as part of its reorganization and more closings are likely.

[storewanderer]

J.C. Penney to be bought by its biggest landlords, Simon and Brookfield

Wells Fargo has agreed to extend Penney $2 billion in revolving credit and when the transaction is completed, Penney will be left with $1 billion in cash.
More than 70,000 jobs may be saved by the transaction. Penney has already closed almost 150 stores as part of its reorganization and more closings are likely.

It will be interesting to see if this ownership group tries to turn a profit or just tries to run this operation at breakeven. It isn't cheap to run a big department store chain. We will see how this works out.

I think these mall owners made a mistake and they are over-extending themselves with a bad asset (JCP) with this move. The real prize is Macy's. At the rate Macy's is going, it will be in this position within a few years... and Macy's is the true prize with a strong brand, stronger private label, larger product mix, better systems, better technology, an actual functioning website, and is what the mall owners should go after. I suppose if they are successful with this JCP venture they can go after Macy's when it finally goes under, as well. Given how broken JCP is, that is a big if.

[pseudo3d]

J.C. Penney to be bought by its biggest landlords, Simon and Brookfield

Wells Fargo has agreed to extend Penney $2 billion in revolving credit and when the transaction is completed, Penney will be left with $1 billion in cash.
More than 70,000 jobs may be saved by the transaction. Penney has already closed almost 150 stores as part of its reorganization and more closings are likely.

It will be interesting to see if this ownership group tries to turn a profit or just tries to run this operation at breakeven. It isn't cheap to run a big department store chain. We will see how this works out.

I think these mall owners made a mistake and they are over-extending themselves with a bad asset (JCP) with this move. The real prize is Macy's. At the rate Macy's is going, it will be in this position within a few years... and Macy's is the true prize with a strong brand, stronger private label, larger product mix, better systems, better technology, an actual functioning website, and is what the mall owners should go after. I suppose if they are successful with this JCP venture they can go after Macy's when it finally goes under, as well. Given how broken JCP is, that is a big if.

The idea of breaking up the DCs and the actual stores is a strange one, if they want to liquidate the DCs and put them on the market, or sell items to other chains, and actually trying to salvage JCPenney is more than keeping the lights on.

That was the most irritating part of the Sears post-bankruptcy stunt, they couldn't even invest in fixing the store conditions...sure, they might still be cluttered and dowdy-looking, but the fact that they didn't bother putting back up pricetags where they had been ripped off or damaged was telling.

I still stand by my earlier comment, that JCPenney's best hope is hitching to a larger retailer and playing off strengths, and maybe the "new" JCP would prep them for that.