J.C. Penney Slashing 2009 Capital Expenditures

Cataloger/retailer J.C. Penney is scaling back: According to further details of its 2009 bridge plan released on June 25, it will reduce capital expenditures from $1 billion in 2008 to $650 million next year. That’s nearly 50% less than the $1.2 billion spent in 2007.

Where will it save money? Twenty new or relocated stores will open in 2009, compared to 36 new or relocated stores that will open this year. Previous plans called for 50 stores to open each year through 2011.

And the Plano, TX-based company has reduced its renovation plans to 10-15 stores in 2009, down from the 20 renovations it expects to complete this year – compared to previous plans to redo 65 stores each year through 2011.

J.C. Penney CEO Myron E. Ullman III said in a statement that the company expects the coming “to remain very challenging for the American consumer.” First-quarter financials for J.C. Penney were certainly a solid sign of these trying economic times.

For the period ended May 3, the general merchant’s net sales fell 5.1%, to $4.12 billion, from $4.35 billion a year ago. What’s more, net income for the quarter sank nearly 50%, to $120 million, from $238 million for the same period last year. Penney’s same-store sales decreased 7.4%, but Internet sales rose 8.7%.

Stuart Rose, managing director for investment bank Tully & Holland, applauds Penney’s plan. “While you have to plan for the long term when things are better, you must live through the short term when times are tough. While strong players can make acquisitions during down times, most players have to cut back plans.”

Controlling inventory is key to success in lean times, Rose says: “It’s one of the largest assets with the shortest life span.”

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