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Published May 18, 2020
Published May 18, 2020

Through its 118-year history, JCPenney survived the Depression, two world wars, the Walmart effect, the Great Recession, the Amazon effect, the decline of malls, and a series of unprecedented missteps in its attempt to reinvent the department store, but it could not survive the combination of the e-commerce era and COVID-19. The announcement came a week after resolving a legal spat with Sephora and the same day the Commerce Department data showed retail sales fell 16.4% in April, the steepest drop on record, with sales at clothing stores down 89% from a year ago. To date JCPenney represents the biggest casualty amid closures tied to the coronavirus pandemic, with 846 stores that are anchors at many American malls and 85,000 employees.

The Plano, TX-based retailer said it filed for Chapter 11 protection from its creditors in federal bankruptcy court for the Southern District of Texas in Corpus Christi. The company said it had struck a deal with certain lenders that will reduce several billion dollars of its debt and would explore a sale of the company. It also said it plans to close stores and that specific locations and timing would be disclosed in coming weeks.

“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country. As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company. Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy—and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt,” said Jill Soltau, Chief Executive Officer of JCPenney.

Ms. Soltau continued, “Implementing this financial restructuring plan through a court-supervised process is the best path to ensure that JCPenney will build on its over 100-year history to serve our customers for decades to come. We believe the RSA and the widespread support we have received from our asset-based lenders and first-lien lenders will allow us to pursue a financial restructuring on an expedited timeframe. We are also encouraged by the level of support we have received from our vendor partners, landlords, and other stakeholders, whose confidence in our business and our people are expected to contribute to a successful reorganization.”

“We have a newly refreshed, highly experienced team of retail executives who remain focused on rebuilding our business and restoring financial strength to JCPenney. This team has continued to innovate even during these challenging times, implementing substantial improvements to our flagship eCommerce platform to increase efficiency and ensure our loyal customers continue to have access to the products they need through elevated shopping experiences. I would also like to thank all of our outstanding associates for their continued dedication to our company and their passion for meeting and exceeding our customers’ expectations. We are continuing to serve our customers as we move through this process with a commitment to working seamlessly with our vendor partners and landlords. We look forward to emerging from both Chapter 11 and this pandemic as a stronger retailer, continuing to implement our Plan for Renewal, and building capabilities focused on satisfying customers’ wants and needs,” Soltau concluded.

What The Experts Are Saying:

“They had a new CEO and some creative ideas, but they ran out of time,” Camilla Yanushevsky, an analyst for CFRA Research, told The Washington Post. “The company was a ticking time bomb.”

“J.C. Penney actually embraced e-commerce earlier than most other U.S. department store chains, but the company did not capitalize on this head start,” Bob Hoyler, Senior Research Analyst at Euromonitor International, said in a statement to CBS News. “J.C. Penney has not been able to survive on its e-commerce sales alone during the pandemic, so the forced store closures represent months of revenue that will simply never be recouped.”

“Before the pandemic, J.C. Penney was hemorrhaging sales,” retail analyst Nick Egelanian, president of retail development firm Siteworks​, said to Retail Dive. “The chain was effectively done. They were testing a new concept in a suburb of Dallas, but it was way too late—too little too late. The only thing that they had was a lot of cash on hand.”

“Retailers frequently use store closing sales to liquidate inventory and raise cash they need to fund operations during a bankruptcy reorganization,” said Reshmi Basu, an expert in retail bankruptcies at Debtwire. “That only makes it even harder for a company to survive the bankruptcy process. Many retailers have entered bankruptcy intending to stay in business but have failed to do so.”

“The customer experience is forgettable,” Bob Phibbs, Chief Executive of Retail Doctor, a New York-based consulting firm, told The Washington Post last year. “Nobody is going into a J.C. Penney and saying, ‘You’ve got to see this place. It’s great.’”

“The bifurcation that was already happening in retail is just going to accelerate during the pandemic,” said Mickey Chadha, a senior credit officer at the rating agency Moody’s. “The retailers that were already weak—J.C. Penney, J. Crew, Neiman Marcus—are going to come out even weaker.”


  • JCPenney made a $17 million interest payment on Friday.
  • It had $500 million in cash on hand and received commitments for $900 million financing to use during the bankruptcy process.
  • The retailer said the lenders that hold about 70% of its first-lien debt have agreed to the restructuring.
  • They have 846 stores and 85,000 employees.
  • Spring is traditionally a strong season for the retailer, which reopened a few of its stores this month, but sales have declined by 90%.
  • In its most recent quarter, sales fell nearly 8%, to $3.4 billion, from the year-ago period, while income was $27 million, down from $75 million a year ago.
  • The first stores that close are expected to be approximately 200 stores without Sephora shops that are small or don’t have much foot traffic.
  • The company skipped a couple of debt payments in April but was in active negotiation with its lenders.
  • About $150 million of debt is due in June.
  • Its term loan of $2.06 billion matures in 2023.
  • The next big debt maturity is $400 million in 2025. Other maturities start in 2036.
  • Penney recently appraised its real estate, including stores, warehouses, and leased and owned property; the value is $3.75 billion as an ongoing operating business and $2.04 billion if the business is closed.
  • Penney wants to spin off its real-estate holdings into a public trust separate from the retail operations.
  • Kirkland & Ellis is serving as legal adviser to JCPenney, Lazard is the financial adviser, and AlixPartners the restructuring adviser.

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