The long struggling department store JCPenney filed for bankruptcy on Friday, becoming the third major retailer following J.Crew and Neiman Marcus to restructure its debt as the coronavirus continues to pummel the retail industry.
The retailer said it plans to close additional stores through bankruptcy. The first phase of closures will be disclosed in the coming weeks, and it will “explore additional opportunities to maximize value, including a third-party sale process,” the company said.
Based in Plano, Texas, the retailer was founded more than a century ago as one of the country’s first department stores. But like many other department stores it has been on a downturn as people turn to online retailers and fast fashion to shop.
JCPenney, which operates 850 stores in the U.S. and Puerto Rico, entered the pandemic with falling sales and a $3.7 billion debt load. Its annual sales have plunged in recent years as it cycled through four chief executive officers since 2004. Its revenue has dropped more than 40 percent since 2007, and its stock is currently priced at just 24 cents.
“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country,” CEO Jill Soltau said in a statement. “As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company.”
JCPenney is the latest in a string of retailers to seek out debt restructuring as retail sales plunge. In April, clothing sales fell 79 percent amid a record 16 percent drop in overall retail sales.
Founded by James Cash Penney at the turn of the century in Wyoming, JCPenney has cycled through countless bets that it would fall under economic stress. In the 1990s, JCPenney dominated retail with a massive catalog designed for shoppers looking for affordable styles. It was one of the first companies to start selling online. But with the rise of online shopping, the company had difficulty finding its identity as competition increased.
Under Soltau, the company seemed to be on a turnaround track. It renegotiated terms with suppliers and landlords and designed some of its stores to include space for workouts, haircuts and coffee breaks.
JCPenney said it received $900 million in financing from its existing first lien lenders to fund the bankruptcy, including $450 million of new money. It had about $500 million in cash when it filed for Chapter 11 bankruptcy with the U.S. Bankruptcy Court for the Southern District of Texas, in Corpus Christi.
The company missed a $12 million interest payment on April 15, starting the clock on a 30-day grace period. Earlier on Friday, it said it made a $17 million interest payment that was due May 7.