Will J.C. Penney be renewed under new ownership?

Discussion
Photo: J.C. Penney
Oct 29, 2020
George Anderson

J.C. Penney has entered into a purchase agreement with Brookfield Property Partners and Simon Property Group and a group of first lien lenders to acquire the company’s assets. The department store retailer said it expects the deal to be finalized before the holidays, allowing it to operate under new ownership outside of Chapter 11.

Under the terms of the deal, Brookfield and Simon take ownership of “substantially all” of Penney’s operating and retail assets. The first lien lenders will acquire all of Penney’s distribution centers and 160 of its real estate assets. Penney’s new owners have reached agreement with the lenders on master leases for the properties and distribution centers acquired by the lenders.

“This transaction is a testament to the thousands of dedicated employees who have been working incredibly hard over the last several months under difficult circumstances,” said Penney CEO Jill Soltau in a statement. “Our customers are at the heart of JCPenney and we look forward to serving them under the JCPenney banner for decades to come. Our team remains laser focused on implementing our Plan for Renewal to offer compelling merchandise, drive traffic, deliver an engaging experience, fuel growth and build a results-minded culture.”

Penney’s new owners are counting on Ms. Soltau and the executive team she has put together to help the chain return to the path of profitable growth. The department store issued a press release back in May saying that it “had meaningful progress” toward achieving its goals and have either met or exceeded guidance on all five of its financial objectives for 2019. Prior to its business being disrupted by the novel coronavirus pandemic, Penney reported that it had achieved improvements in same-store performance in six of its eight merchandise divisions.

It remains to be seen whether Penney will continue to substantially reduce its store count going forward, although many expect that Brookfield and Simon will not follow that strategy aggressively, particularly when it comes to properties that each operates. Penney announced as part of its Chapter 11 filing in July that it planned to shutter 242 of its 846 stores.

Many have long contended that Penney’s core problem, along with many of its department store rivals, is that it has lost its relevance in the minds of many American consumers, particularly Millennials and Gen Z.

DISCUSSION QUESTIONS: Do you think J.C. Penney is coming out of Chapter 11 in a stronger operating position to put CEO Jill Soltau’s plan in place, reestablish relevance with consumers and grow its business? What do you see as the biggest needs to be addressed in the short- and long-term?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The J.C. Penney’s brand is murky at best. They should engage a world-class brand strategist to help craft a new identity."
"I have always said that Jill Soltau is a brilliant merchant. That being said, this deal smells a lot like the Sears bonfire."
"For Penney’s to avoid being the world’s 2nd longest liquidation sale (after Sears), they have to win back significant share of wallet..."

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29 Comments on "Will J.C. Penney be renewed under new ownership?"


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Neil Saunders
BrainTrust

New owners may inject some energy and determination and provide J.C. Penney with some breathing space. However a change of ownership will not, in and of itself, save the company. There is a lot of rot which has set in at J.C. Penney: the brand is tarnished, many customers have been lost, some stores are an atrocious mess, online isn’t as developed as it should be, its apparel and home offers look tired, and so the list goes on. Jill Soltau has some sensible plans but it is going to take an incredible amount of effort, and money, to resolve all of these issues. Under normal circumstances this would be astonishingly tough. In a world where consumer demand has been sapped because of the pandemic I think very serious question marks over J.C. Penney’s long term survival remain.

Gene Detroyer
BrainTrust

Great description, “breathing space.” Yes, a few extra breaths before it dies.

Neil Saunders
BrainTrust

Or “last gasps!”

Richard Hernandez
BrainTrust

The article hit the nail on the head – what is J.C. Penney’s relevance in the box retailer segment? How fast can they implement the Plan for Renewal remodels needed and can they do something quick to help in the upcoming holiday season? I believe last year we were talking about it being the last holiday season for Sears, but yet here we are and Sears is still with us floundering along. I wish Ms. Soltau the best in pursuing the turnaround but I am on the fence as to whether or not J.C. Penney’s can make it long term.

Art Suriano
Guest
I am pleased to see that J. C. Penney has been given another opportunity to survive. I’m an old retail guy, and watching all these stores closing, many I grew up with, is sad. That said, whether J C Penney can survive long term is another question. First, J. C. Penney has got to figure out who they want to be as a department store and commit to that direction. Just being the same store they’ve been is not going to work for them. We have a Macy’s company that is doing reasonably well. We need something different, and that’s what J. C. Penney needs to figure out. Is it more stores within their store? Is it more technology? Is it different and higher quality merchandise? As for me, I think it’s all of these and more. The second issue is that I’m not sure if Ms. Soltau has the skill set to lead them long-term. She didn’t have outstanding success at Jo-Ann Stores and since she’s been at the helm of J. C. Penney,… Read more »
storewanderer
Guest
26 days 13 hours ago

Kohl’s will fill in the gap of “something different from Macy’s.” They actually try to run a decent store and website and be relevant to their customers. Frankly, Sears was more relevant than JCP — Sears had a lot more to offer; more product categories, more services, etc.

Art Suriano
Guest

I think Kohl’s is already successful being different from Macy’s and I think it’s been Macy’s at times trying to be more like Kohl’s. JCP has an opportunity to be unique perhaps as the department store of the future assuming they can figure that out and stay committed. But I see your point and agree with you.

Mark Ryski
BrainTrust

While I appreciate Brookfield and Simon’s creative effort to save this brand, I struggle with how things will be different with the same leadership. Eliminating some of the financial constraints is helpful, but it won’t drive shoppers into the stores. The headwinds from the pandemic make this turnaround story much more precarious.

Bob Phibbs
BrainTrust

This is the logical end to Ron Johnson and I might add Bill Ackerman who engineered the ill-fated gutting of a beloved brand eight years ago. Sorry, I don’t see Ms. Soltau’s two+ years on the job as successful because they averted disaster. J.C. Penney’s loyal customers were shown the door under Johnson and found a new home at Target and probably Walmart. She’s not going back and her daughters aren’t either.

Gene Detroyer
BrainTrust

They “were shown the door” or they have died.

David Weinand
BrainTrust

An uphill battle for sure. Once trust is lost with the customer, it is difficult to win back – especially in retail where there are so many choices. The new ownership should definitely give them some rope by which to execute on Ms. Soltau’s plans but the relevance of the brand has passed.

Gene Detroyer
BrainTrust

Can we stop talking about resurrecting J.C. Penney? No matter what they say, the new owners are just trying to extend the inevitable. They can have empty properties today or with a little investment push the inevitable off until tomorrow. Despite great “plans” there will be little investment and what there is will be window dressing.

This is a financial play for Brookfield and Simon, it is not a retail play by any means.

Gary Sankary
BrainTrust

I would be more optimistic if this were a merchandising company with experience fashion retailing rather than a commercial real estate company trying to keep anchors open in their centers. J.C. Penney finds themselves in the unenviable position of having to recover market share from competitors who have done a better job being relevant and interesting to their core shopper. To implement the strategy laid out by Ms. Soltau, they have to do a better job of understanding who their customers are and what they really want. Doing same thing over and over again, as was the pattern at J.C. Penney, will not produce the results they need — for J.C. Penney or Brookfield.

Cathy Hotka
BrainTrust

Before the Internet, that anchor store location was all-important. Today, though, brand identity takes its place, and the J.C. Penney’s brand is murky at best. They should engage a world-class brand strategist to help craft a new identity.

Rich Kizer
BrainTrust

I have always said that Jill Soltau is a brilliant merchant. That being said, this deal smells a lot like the Sears bonfire.

Craig Sundstrom
Guest

I think the fundamental difference is that Lampert seemed to care very little if a failing Sears produced a lot of collateral casualties; BPP and Simon know the collateral casualties of a failing JCP will be them.

Jeff Sward
BrainTrust

If the core problem is lost relevance, then determining if relevance has been found will take several months post emerging from bankruptcy. The good news is that J.C. Penney will probably emerge from bankruptcy with highly incentivized partnerships and relationships that will all be working very hard towards that new relevance. Nobody is under any illusions that the old model just needs a little tweaking. Any plans they had pre-bankruptcy can only have been made stronger by the very intense scrutiny their business has been put through.

Bindu Gupta
BrainTrust

While CEO Jill Soltau states that the customers are at the heart of the J.C. Penney brand, they would need to make changes in organizational structure, brand voice and their business and marketing strategy to be truly deemed customer-centric.

Ryan Mathews
BrainTrust

With all due respect to one and all, I think the only way Soltau and her team will pull off anything approaching a win is to wipe the slate clean, launch a (really) brand new retail approach, and maybe change the brand name. There is just not enough of a valid consumer demand for what J.C. Penney is trying to sell. Forget trying to salvage a terminal brand and start radically rethinking how that space – as in empty space – could be repurposed and rebranded into something that appeals to today’s consumer. America doesn’t need another box store, or another department store, or one more downmarket fashion store. The target market is no longer “her” and her female relations. Incrementalism only prolongs the inevitable.

Ricardo Belmar
BrainTrust
Up to this point, we have only been hearing about a financial numbers game for the survival of J.C. Penney. We might as well have been playing roulette for the future of the brand. We have yet to hear any plans for how J.C. Penney will reinvent themselves in the eyes of the shopper. What does the brand mean to customers? How are they relevant? Why should customers visit J.C. Penney stores? What is the compelling offer to shoppers once they are in the store? There are still issues with merchandise and assortment to resolve. Until the turnaround plans make dramatic changes in those areas, this is only going to make things incrementally better financially for the brand, but not differentiate them enough to be successful long-term. They have lost most of their customer base to retailers like Target who, frankly, has become the modern department store. I fear that even a newly financially stable J.C. Penney will remain caught in the boring middle of retail and only linger on in a slow demise. I… Read more »
GwynneG
Guest
26 days 15 hours ago

J.C. Penney has to figure out who their customer is or who they want their customer to be. Amazon excluded, it’s just about impossible to be all things retail to all people. Figure out your market then figure out the competition in that space; learn where the competition excels and where they’ve left opportunity; then bring in the experts to develop the brand for that market. Easy to say, hard to do. I believe the J.C. Penney brand is in a better place than Sears or Montgomery Ward or Kmart were at the end of their lives so I give them a fair shot at coming out on the other side.

Dick Seesel
BrainTrust

In defense of Jill Soltau (a former Kohl’s colleague), she and her team didn’t have much time to roll out their new merchandising initiatives before the pandemic hit. And in defense of Simon and the other investors, they obviously feel this key mall anchor has a future. But the initiatives being tested in Hurst, TX need to be rolled out as quickly as possible in order to rebrand J.C. Penney in a meaningful way; otherwise it may be too late to save this retailer.

Steve Dennis
BrainTrust

I’ve been to the Hurst store. It’s somewhere between lipstick on a pig and a slightly better version of mediocre.

Brian Numainville
BrainTrust

No. Longer. Relevant.

Steve Dennis
BrainTrust

They certainly have improved changes under new ownership and more balance sheet flexibility. But better is not the same as good, and it’s certainly far from remarkable. For Penney’s to avoid being the world’s 2nd longest liquidation sale (after Sears), they have to win back significant share of wallet from where it has leaked for over a decade. It’s hard to imagine what that looks like, and it’s all made much harder by the effects of the pandemic on certain categories which JCP is heavily reliant upon. Barring a miracle, I”m afraid it’s dead brand walking.

storewanderer
Guest
26 days 13 hours ago

There is too much competition — competition that keeps getting better all the time. JCP is done. Their customers have moved on, some moved “up” and others moved to the various off-price stores that have sprouted up around various neighborhoods closer to customers. I would call the off-price stores a move “up” from JCP as well. The TJX stores have far better customer service than a JCP and are neater and better organized. Ross is probably a step down.

Cynthia Holcomb
BrainTrust

Emotion for the past serviced at the behest of those blinded by their own blind spots continues the JCP saga. JCP touts their scorecard managing the mechanics of retail. This skill is abundant by many, many in the retail space. The missing JCP skill set: product, a reason to buy, a reason to visit a JCP store. The number one reason consumers buy a product: an emotional connection between product and consumer.