After 118 years, J.C. Penney filed bankruptcy in an effort to get out from under a mountain of debt. On April 14, the department store said they were considering filing for bankruptcy after they temporarily closed 850 stores due to COVID-19. Only a few states have begun to allow J.C. Penney’s and other retail stores to reopen, at the beginning of May, with the nation’s economy virtually paralyzed during the first quarter of 2020.
The company has had significant financial trouble and hasn’t turned a profit since 2011. They are currently $4 billion in debt. In April and May of 2020, they missed two bi-monthly payments to debt collectors, only worsening the outlook.
Since 2001, they have closed roughly 75% of their stores, and sales are a third of what they were during J.C. Penney’s last fiscal year. At their peak, Penney’s claimed $20.4 billion in retail sales and a net income nearing $1 billion. Now they are looking at closing nearly one-quarter of their remaining stores during the bankruptcy restructuring.
The stock traded as low as $0.14 on Monday, May 11, but rebounded to nearly a quarter by the end of the week. In after-hours trading, on Friday, the stock plummeted yet again to about $0.10. Now they are at risk of being dropped from the NYSE. J.C. Penney has been below the $1 stock valuation requirement since the beginning of January.
J.C. Penney is not the first department store affected by the coronavirus. Along with J.C. Penney, Stage Stores, J. Crew, and Neiman Marcus all filed for Chapter 11 bankruptcy protection within the last week. All have sited loss of income from COVID related closures as part of their financial difficulties.
Laurenshirsch. (2020, May 12). JC Penney in talks for $450 million loan as it eyes Friday bankruptcy filing. CNBC. https://www.cnbc.com/2020/05/12/jc-penney-in-talks-for-450-million-loan-as-it-eyes-friday-bankruptcy-filing.html
Laurenshirsch. (2020, May 15). Long-struggling JC Penney files for bankruptcy as coronavirus crushes hopes for a quick turnaround. CNBC. https://www.cnbc.com/2020/05/15/jc-penney-bankruptcy-filing.html
Stone, M. (2020, May 15). The 118-year-old JCPenney has filed for bankruptcy and plans to close some stores, the latest retailer forced into Chapter 11 by pressure from the pandemic. BusinessInsider. https://www.businessinsider.com/jcpenney-files-for-bankruptcy-amid-coronavirus-pandemic-2020-5
Villasanta, A. (2020, May 13). JCPenney Bankruptcy: Retailer Closing 180 Stores, To Secure $450M Loan. IBTimes. https://www.ibtimes.com/jcpenney-bankruptcy-retailer-closing-180-stores-secure-450m-loan-2975182