JC Penney, the more than 100-year old US department store chain, filed for bankruptcy on Friday, making it the latest business to hit bottom amid the coronavirus pandemic.
The chain, known for selling family apparel, cosmetics and jewelry, is the latest in a series of victims of the pandemic-induced economic downturn. With its 850 stores and almost 90,000 workers, it is also reportedly the largest retail casualty so far.
The Covid-19 fallout represented a final blow to the company, which had been struggling for some time.
Many brick-and-mortar retailers are also battling to stay afloat, according to a report from the Associated Press. In the past two weeks, J Crew, Neiman Marcus and Stage Stores have filed for bankruptcy protection.
“The whole economic model is unraveling,” Neil Saunders, the managing director of GlobalData Retail, told the Associated Press. “This is going to be very painful. For some, it’s going to be fatal.”
The bankruptcy filing caps a long decline for the 118-year-old chain, which once operated more than 1,600 locations that became fixtures in US malls. The company at one point employed nearly 200,000 people.
Even before the coronavirus outbreak, JC Penney was struggling with nearly $4bn of debt and pressure from both discount retailers and e-commerce companies. Larger retailers such as Walmart and Target have squeezed smaller rivals by offering bargain-price apparel.
The company on Friday said it would begin closing some stores permanently in phases and would disclose further details in coming weeks. People familiar with the matter previously told Reuters that the company initially plans to permanently shutter roughly 200 stores, saying the figure could fluctuate depending on negotiations with creditors.
James Cash Penney founded the eponymous retailer with partners in 1902. Averse to the haggling that was common at the time, he believed prices should be low, set and marked, an attitude that served as a precursor to modern shopping, according to the JC Penney Museum in Hamilton, Missouri, the founder’s hometown.
JC Penney stores initially dotted Main Streets in rural towns dominated by farmers. After expanding to operate more than 30 stores, it went public in 1929. By the 1970s, JC Penney had become a mainstay across the US.
Like other retailers, JC Penney has started reopening its stores in stages as many states have begun to loosen coronavirus restrictions. But with unemployment now at the highest level since the Great Depression, there are serious concerns that consumer spending will remain dampened for a prolonged stretch.
Against that backdrop, JC Penney faced a looming $105m debt payment in June and $300m of annual interest expenses. Adding to pressure was an unprecedented span of lost sales and uncertainty whether shoppers concerned about their health would return to stores.
Days before seeking bankruptcy protection, JC Penney paid nearly $10m in bonuses to top executives. The company said it was “taking necessary steps to retain our talented management team”.
