(CMR) Retail giant JC Penny filed for bankruptcy on Friday. The company's filing in Corpus Christi, Texas, revealed that it had a debt of about $8 billion. The company will be closing nearly 200 stores in 2020 and another 50 next year in hopes of turning the company around.
At this time there is uncertainly about which of the 846 stores will be permanently closed and how many of its 85,000 employees will be unemployed as a result. The filing further revealed that the 118-year-old establishment had arranged to borrow an additional $450 million from those lenders to pay for operations, as the company seeks to reorganize.
JC Penny blamed the Covid-19 pandemic for the need to file bankruptcy.
“The American retail industry has experienced a profoundly different new reality, requiring JC Penney to make difficult decisions in running our business,”
said Chief Executive Officer Jill Soltau in a statement.
“The closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt,”
JC Penny has been struggling since the summer of 2011 when it reported net profits in only five quarters, all of which were attributed to the holiday shopping season.
In that same year, JCPenney has closed more than 20% of its stores while cutting more than 40% of its staff.
JC Penny is not unique, as many in the retail industry have been feeling the pinch prior to the COVID-19 pandemic struggling to compete with the increased competition online.
“These old department stores were physical marketplaces and now the marketplace has moved online,” said an analyst at Bloomberg Intelligence Poonam Goyal.
“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,” added Goyal.
JC Penny's bankruptcy filing doesn't necessarily mean the company will go out of business; as other companies in the industry, like J.Ctew and Neiman have undergone similar exercises, which have allowed them to shed debt and other liabilities while reorganizing and remerging as viable entity locations.