Is Amazon about to buy J.C. Penney?

Discussion
Photo: Getty Images
May 19, 2020
George Anderson

Amazon.com has wasted no time in pursuing a possible acquisition of all or some of J.C. Penney’s business, according to news initially broken by WWD.

According to one unnamed source, Amazon already has a “team in Plano (TX),” where Penney is headquartered. Why Amazon might be interested in Penney remains unclear, although three potential factors have been raised in the reporting including the e-tailing and tech giant looking to:

  • Grow its apparel and accessories sales;
  • Turn some of the department store’s properties into distribution facilities; and/or
  • Create “a new tech-driven” store model that would make use of its Just Walk Out cashier-free system.

Penney is also likely to be a relatively inexpensive acquisition after filing for Chapter 11 bankruptcy protection and having its stock sales frozen on the New York Stock Exchange.

The department store retailer made clear in its petition to the court that it would have to pursue a sale of its assets if it was unable to gain the support of lenders by July 15 for its business plan. Seventy percent of the chain’s lenders have agreed to date to support its restructuring proposal.

Penney announced it would close 242 of its 846 stores, spin off its real estate as a separate publicly-traded investment trust and push ahead with a turnaround plan put in place by CEO Jill Soltau that focuses on core categories such as women’s apparel along with improved customer service and low prices.

“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,” said Ms. Soltau in a statement. “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.”

Neither Amazon nor Penney would comment on discussions, if any, between the parties.

DISCUSSION QUESTIONS: Would a purchase of all or part of J.C. Penney by Amazon make sense for either party? Would Penney’s likelihood of future success be greater remaining on its own or as part of another company?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"From a real estate and distribution perspective this makes a lot of sense for Amazon, particularly for last-mile fulfillment in more rural areas."
"Acquiring the real estate and top talent is a smart move at a bargain price."
"One of the only things Amazon is really missing is a legacy. The next-gen zeitgeist calls for apparel retailers with history and physical roots."

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41 Comments on "Is Amazon about to buy J.C. Penney?"


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Mark Ryski
BrainTrust

Amazon has been threatening to enter the non-grocery market for years, and the opportunity to do it has never been better with J.C. Penney. The fact is, despite good effort by capable people, J.C. Penney is stuck in the department store morass, with overwhelming debt and a bleak future. The pandemic has accelerated many trends, and the demise of the department store is one of them. Amazon acquiring J.C. Penney has the potential to transform the department store category and bring much needed excitement and shoppers to the mall. This appears to be a very interesting proposition for both Amazon and J.C. Penney.

Dick Seesel
BrainTrust

Mark, see my comment: Buy it for the locations, not for the brand equity.

Mark Ryski
BrainTrust

I agree Dick. I don’t believe Amazon should attempt to re-build or run the J.C. Penney brand — rather, re-imagine what’s possible with the physical footprint the J.C. Penney stores occupy.

Suresh Chaganti
BrainTrust

Amazon is probably the only player that could make a strategic play with J.C. Penney. Who knows what they have in mind with the wealth of options and cash at their disposal. There are a lot of other players who can afford to buy, but may not be able to make much difference to J.C. Penney.

Bob Amster
BrainTrust

I agree. With cash on hand, Amazon can afford to buy, pick apart, retain and/or spin off. The only thing that I don’t think Amazon can do with the acquisition, is to try to continue to operate in most malls. Malls do not look like a hot prospect for J.C. Penney except for the very few, very good malls.

Ray Riley
BrainTrust

From a real estate and distribution perspective this makes a lot of sense for Amazon, particularly for last-mile fulfillment in more rural areas. I’d expect Amazon to be looking for lighter pricing reflective of that model, and looking to further develop what could be the retail format shortly thereafter.

Jeff Weidauer
BrainTrust

Outside of the physical store space that could be gotten for cheap and converted to local distribution, J.C. Penney has no assets of value to Amazon or anyone else. The brand has declined into irrelevance and there are no unique differentiators as with Sears’ Die Hard or Craftsman.

Paula Rosenblum
BrainTrust

The stores are the value.

Jeff Sward
BrainTrust

YES, PLEASE! It’s a win in every way I can think of. J.C. Penney needs extensive re-invention. It mostly just duplicates other offerings in the mall. The mall, almost every mall, needs extensive re-invention and a new reason for being. I have long argued that Amazon should buy Sears, not for the brand, but for the space — and what Amazon could contribute to a re-purposed mall. Ditto J.C. Penney. Don’t need every single store? Instant warehousing and distribution points all over the country. This makes so much sense. Yes, please.

Ken Morris
BrainTrust

I believe this would be a good move for both parties. Amazon would get a big footprint in brick-and-mortar and J.C. Penney would get value for their employees and stockholders. The J. C. Penney locations are huge and could function as micro-distribution centers with a showroom atmosphere for popular and bigger ticket items. Given the acquisition of Whole Foods this acquisition would continue a move for dominance in the store arena as we shift from a scan and bag model to a distribution paradigm.

Dave Wendland
BrainTrust

Strategically, this would thrust Amazon into the brick-and-mortar world and I’m confident in their ability to transform the experience to blend online/in-store strategies. From a financial standpoint, I believe Amazon could negotiate a favorable proposition and this may be the only possible pathway for J.C. Penney’s survival (although it would no longer be your grandmother’s J.C. Penney).

Dick Seesel
BrainTrust
When Amazon bought Whole Foods, there was clear overlap between the two companies’ customers (and brand images) at the time and it enabled Amazon’s push into groceries. Further, it gave Amazon a physical footprint that it otherwise lacked. I don’t see the same advantage here, although it’s true that Amazon could buy J.C. Penney for a song. Yes, Amazon would instantly gain hundreds of store locations around the country (many of them in secondary malls, however) and with an opportunity to reinvent the department store category. But is it a wise use of Amazon’s resources to buy a brand struggling with omnichannel and its own customer demographics? As to “reinventing” JCP, we all remember what happened when Ron Johnson tried to do the same — $4 billion in lost sales in one year, and the company never recovered. Amazon’s tie-up with Kohl’s in the past couple of years (the return desks, etc.) got the same rumor mill moving at the time, and frankly it would be a better match. In any case, Amazon has the… Read more »
Stephen Rector
Guest

Amazon can get some decent real estate for a steal – they can take the best locations and turn them into laboratories to gain more insights about in-store customer behavior. If they do purchase it, would they keep the J.C. Penney nameplate on the front of the store? Doubtful.

Dick Seesel
BrainTrust

Agreed. I could see a collection of Amazon businesses and “solutions” under one roof, from Amazon Go to books to food, and maybe apparel and home too — but not with the J.C. Penney nameplate when their own brand equity is so much stronger.

Dave Wendland
BrainTrust

You’re absolutely right, Stephen. The J.C. Penney nameplate would only create a shadow from which Amazon could not brightly emerge.

Gene Detroyer
BrainTrust

Under no circumstances would I buy J.C. Penney. But I would sure be interested in the property if it were the right price. There is no resurrecting the department store as it is, but the use of the stores by a company like Amazon as mentioned in the discussion makes sense.

Throw that J.C. Penney name away — it is worthless. Forget the department store business model, it is worthless today. Look to the pieces that have value and strategically fit with the future of Amazon’s business.

Phil Rubin
BrainTrust
8 months 2 days ago

Given that J.C. Penney was slowly dying pre-COVID-19, this is likely the best outcome for its emergence for bankruptcy other than liquidation. For Amazon, just consider one of the other RetailWire discussions today that posits whether Walmart is now unstoppable.

Amazon, if it does buy J.C. Penney, will be good for Amazon and at a sharp discount to any other combination, including Kohl’s. Kohl’s hasn’t benefited from its Amazon relationship and yet it has a much more viable business than J.C. Penney.

Richard J. George, Ph.D.
BrainTrust

This is a terrific opportunity for Amazon to expand its brick-and-mortar presence at a relatively low level of investment. I view this potential acquisition more for its logistical reasons than for its desire to expand its apparel and accessories sales. BOPIS and BORIS issues confronting Amazon would allow it to expand its omnichannel fulfillment solutions. Walmart is surging, both in-store and online. I see Amazon watching this growth and wanting to participate. However, if Amazon buys J. C. Penney, I expect the stores’ look and operations to not resemble at all what a current J.C. Penney looks or operates like.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader
8 months 2 days ago
There are many potential reasons being thrown about for why Amazon would buy J.C. Penney, but the only one I see holding any water is a real estate play that could be used two ways: last-mile fulfillment via secondary mall locations in rural to less suburban areas where Amazon still needs better distribution. This would be the majority of J.C. Penney locations. For those higher grade mall locations, transform the store into an Amazon Department Store, or a much larger scale, better-merchandised version of Amazon 4-star that could also leverage Just Walk Out technology (even if experimentally). In these locations, Amazon doesn’t likely need the extra fulfillment location but can use the stores to experiment and gather consumer data. This is between 100 and 200 locations at most. And don’t rule out some sort of tie-in with mall owners to create something unique. What mall wouldn’t be interested in an anchor Amazon Department Store to drive traffic? What we’ve seen so far of J.C. Penney’s turnaround plan doesn’t demonstrate enough impactful change to do much… Read more »
Ron Margulis
BrainTrust

Big stores just are not the future of apparel and home goods retailing. Amazon would be better served buying the post office.