J.C. Penney (JCP) has finally realized its store base has to get smaller in the age of digital shopping.
In the wake of a disappointing holiday season, J.C. Penney said Friday it will close 130 to 140 stores by the second quarter. The store closures represent 13% to 14% of the company's current store base and less than 5% of annual sales. They have a negligible impact on net income. J.C. Penney said same-store sales at the locations were "significantly below" the remaining store base and operate at a much higher expense rate due to poor productivity.
The company expects $200 million in annual costs savings from the efforts.
"We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers," J.C Penney Chairman and CEO Marvin Ellison conceded. On a conference call, Ellison conceded that J.C. Penney's store footprint was "too large" and that the stores targeted for closure couldn't justify further capital investment.
Shares of J.C. Penney crashed 5.8% to $6.29 on the session as executives struck a cautious tone on profit guidance for 2017 on a conference call with analysts.
To be sure, the store closure news shouldn't come as a shock.