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J.C. Penney To Close 45 Stores

February 24, 2000

PLANO, Texas (AP) _ J.C. Penney Co. Inc. plans to close about 45 department stores and 289 Eckerd drug stores in an effort to turn the troubled retailer around.

Company officials said Thursday most of the closures will occur by midyear, but they declined to say which of its 1,150 department stores and 2,900 Eckerds will close or how many jobs will be lost.

The Plano-based store and catalog retailer also announced that it lost $12 million in the quarter ended Jan. 29. The 8-cents-per-share loss compared with a gain of $207 million, or 77 cents a share, in the same period a year earlier.

Before one-time charges, including store-closing costs, per-share profit fell nearly 40 percent, to 45 cents a share from 72 cents a year earlier. Analysts surveyed by First Call/Thomson Financial had expected 47 cents.

In recent years, Penney’s stores have been battered by competition from aggressive rivals such as Kohl’s department stores and discount chains such as Gap Inc.’s Old Navy.

Penney’s stock has lost about three-quarters of its value in the past nine months. In trading Thursday, shares of Penney were down 68 3/4 cents to $16.18 3/4 on the New York Stock Exchange.

Penney said it will take a charge of about $530 million to close the department stores and the weakest members of the Eckerd chain. The moves will save up to $300 million a year, officials said.

``Half a billion in restructuring is juicy, but I think it could have been bigger,″ said Richard Church, an analyst with Salomon Smith Barney. ``They’ve got a number of underperforming stores that frankly needed to be purged.″

Analysts had expected dramatic moves from new senior executives who have joined Penney in the past few months, and they predicted that more changes are in the works.

Last month, the company announced a campaign to spruce up its stores and centralize its merchandise ordering.

``It’s a long uphill climb. They face a difficult retail environment, and the economy is probably going to create some headwind for them,″ Church said.

``They deteriorated over a decade, so it’s not going to be an overnight fix,″ said Jeffery Edelman, an analyst with PaineWebber, who called the closings ``overdue.″

Although the company remained tightlipped about which stores will close _ a spokeswoman said they hadn’t been selected _ chief executive James E. Oesterreicher said the doomed department stores had $350 million in sales last year.

``Almost all of these stores are operating at a loss,″ he said.

The 289 Eckerds to close are mostly small, low-volume stores that Penney bought from other chains, Oesterreicher said. Selling or closing them will cost the company $450 million in sales this year and $550 million next year, he said.

In its earnings report, Penney said revenue rose 5.2 percent to $9.8 billion from about $9.3 billion a year earlier. But, as the company had previously said, weak holiday sales forced dramatic price-slashing that reduced profit in the fourth quarter. Comparable-department store sales fell 1.4 percent and catalog sales fell 1.9 percent.

For the year ended Jan. 29, Penney said its net income was $336 million, or $1.16 a share, down 43 percent from $594 million, or $2.19 a share the year before.

Oesterreicher also said the company will proceed in the third quarter with its delayed plans to sell 20 percent of the Eckerd chain to the public in a tracking stock.

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