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J.C. Penney Likes Its Store Count Just Fine As eCommerce Beckons

J.C. Penney, the once marquee retailer/department store that until quite recently had fallen on hard times combating the double-edged sword of high store count and relatively low sales, is not throwing in the towel just yet, Fortune reported Thursday (June 11).

In retail, throwing in the towel means shuttering nonperforming stores.

Though the company showed a glimmer of a rebound in the first quarter of the year, with same store sales growth of better than 3 percent year over year that placed J.C. Penney near the top of the retail heap, management still has a long hill to climb back to past glories — annual sales of better than $12 billion are still roughly 30 percent below recent peaks. That comes in the wake of the previous CEO’s tenure, when Ron Johnson took the reins of the company, that did away with promotions and promptly lost a huge swath of customers.

Since then sales growth, though anemic, has returned, even as management projections for a 2017 top line of $14.5 billion remain underwhelming versus the mid-2000s when revenues reached $20 billion.

Many critics point to what they say is a bloated presence all over the map, as J.C. Penney still has a footprint covering more than 1,000 locations. The simple thing to do in order to squeeze efficiency out of operations and boost margins, some observers theorize, would be to get rid of a sizable number of those stores.

But the incoming CEO, Marvin Ellison, who will take over the top spot in August after a stint as J.C. Penney’s president, has other plans. The executive told analysts at a Piper Jaffray conference that many of those locations serve as the “only game in town” for customers and at times even as a “gathering place,” the executive said, according to Fortune. In many cases, stores in rural areas prove to be more profitable than those based in malls (where the latter real estate accounts for as many as 700 of the roughly 1,000 total store count).

And as eCommerce continues to take shape, J.C. Penney needs stores to help build up the digital side of the business, especially as clicks integrate with bricks for the shopping experience. In fact, stores can serve as supplemental distribution facilities, Fortune reported, and Penney's customers who shop across the physical and eCommerce realms spend about 2.5x more than the average shopper, according to Fortune — especially when they go to the store to return items bought online.

In that event, buying and then returning, Penney's stalwarts then linger to buy other items. For its part, the company is planning to let customers place an order on the Web and have an item delivered to a nearby store the next day for pickup. That service will debut next year.

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