With 140 stores already on the chopping block, even more closures could be ahead for JC Penney
The 100-plus stores that J.C. Penney plans to close this year may not be its last.
Just two weeks after telling investors that the chain will exit as many as 140 locations this year, two Wall Street analysts say more closures may be ahead.
At a meeting with analysts in New York City on Thursday, Penney's management said it is testing in its smaller stores some of the initiatives that have been powering its sales in larger locations. Those tests include a smaller version of its Sephora beauty shop and home appliances.
If the tests are successful, Penney's should be able to keep more stores open, Cowen and Co. analyst Oliver Chen said. Otherwise, it may need to close additional stores in the future.
"Management believes closing weaker stores will allow J.C. Penney to more efficiently allocate capital to better performing stores while simultaneously raising the J.C. Penney brand profile," Chen said in a research note. "Stores which had implemented growth initiatives including beauty, with Sephora and InStyle [its salon business], home refresh and with appliance showrooms and plus size significantly outperformed other stores."
Citi analyst Paul Lejuez echoed Chen's sentiment, adding he'd expect the additional closures to occur after the current fiscal year. The possibility of more stores going dark doesn't come entirely as a surprise, as an analysis from Green Street Advisors, a real estate research firm, concluded earlier this year that department stores need to close 800 locations to restore their 2006 productivity.
While revenue at Penney's established stores slipped 0.7 percent in the fiscal fourth quarter, home, appliances and beauty all generated positive comparable sales. The company is using these categories as ways to differentiate itself from its department store competitors and battle the shift toward online shopping.