J. C. Penney Closing Catalog Outlets, Call Centers

Jan 26, 2011 1:02 AM  By

In keeping with its plans to get out of catalogs, J.C. Penney this year will close underperforming stores, phase out its outlet business, and streamline its call center and custom decorating operations.

Company chairman/CEO Mike Ullman III said during a Jan. 24 conference call that J.C. Penney is “committed to retaining the quality of our merchandise. We recognize we’re in a new environment and customers are very pragmatic. We want our cost structure to be more resilient.”

After these changes occur this year, J.C. Penney expects to save $25 million to $35 million in 2012.

J.C. Penney plans to close department stores in Morrow, GA.; West Dundee, IL; Des Moines, IA; High Point, NC; and Culpeper, VA.; and one J.C. Penney Home Store located in Duluth, GA. These six locations no longer meet the company’s profitability threshold.

And since Penney is no longer mailing specialty catalogs as of this year, it will be closing catalog outlets during 2011 and 2012. J.C. Penney will consolidate its furniture outlet business, closing one store in Rancho Cucamonga, CA. The company will have two remaining furniture outlet stores.

What’s more, Penney is closing its call center operations in Grand Rapids, MI, and Albuquerque, NM. All operations supporting its department store and online customers will be handled by three existing facilities in Columbus, OH, Pittsburgh, and Milwaukee.

Also, J.C. Penney plans to close its Sacramento, CA Custom Decorating Fabrication facility, leaving one remaining facility in Statesville, NC, where it will increase staffing to support customer demand. The company will move from managing 525 individual, in-store custom decorating studios to supporting 300 studios in key markets.

Ullman said on Feb. 25 the company will provide an overview of the initiatives it will undertake in 2011 to capitalize on its growth opportunities in its core department store and online businesses.

December same-store sales for J.C. Penney increased 3.7%; total company sales in December rose 2.3%. Internet sales also posted strong growth in December, with significant increases in traffic and orders for the key holiday shopping periods of the week after Thanksgiving and the week before Christmas, though the general merchandise merchant does not break them out specifically.

Neil Stern, a retail analyst and senior partner for retail consultancy McMillan Doolittle, says J.C. Penney’s changes are in line with its strategic direction laid out more than a year ago.

“This continues a move out of high-cost legacy businesses (catalog, customer decoration, etc.) with a focus on profitable stores and a growing online business,” Stern says.

Outlet stores primarily consist of supporting the catalog business, Stern says, “so this is a logical exit.” Call centers can also be more efficiently run and had more use with a catalog-based business, he adds, so it makes sense for Penney to scale back here as well.