JC Penney filed for bankruptcy on Friday, citing debt of about $8 billion — a burden that finally became too much to bear.
The company’s bankruptcy filing in Corpus Christi, Texas, included $900 million of financing to fund the company through restructuring, including $450 million of fresh capital.
The end for the 118-year-old chain came gradually and then suddenly. A parade of chief executives tried different game plans in recent years, changing logos, pricing strategies, store layouts and the merchandise itself. Decisions were made and then undone. Nothing worked. In the end, the department store was finally done in by a force no retailer could have foreseen — a global pandemic that led to a near-total shutdown of the retail sector.
“These old department stores were physical marketplaces and now the marketplace has moved online.”– Poonam Goyal, an analyst at Bloomberg Intelligence
“The American retail industry has experienced a profoundly different new reality, requiring JC Penney to make difficult decisions in running our business,” Chief Executive Officer Jill Soltau said in a statement. “The closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”
Department stores face a collective crisis as an unprecedented economic shutdown due to the COVID-19 outbreak exacerbates many of the industry’s deep-rooted problems. In March, JC Penney temporarily shut down its 850 stores and put most of its 95,000 workers on furlough. The company soon began missing debt payments.
While the company said it plans to continue operating through the bankruptcy, it acknowledged that it will have to close a meaningful number of its roughly 850 stores, a phased process that will begin in the coming weeks.
“These old department stores were physical marketplaces and now the marketplace has moved online,” said Poonam Goyal, an analyst at Bloomberg Intelligence. “They have tried to evolve with exclusive merchandise, a focus on experiences, pop ups and convenience. And while all these are good efforts, they still aren’t enough.”