As JC Penney goes bankrupt, some concern if it must continue to operate

J.C. Penney shop is viewed at the Gateway Center Mall in Brooklyn.

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Does the world of retail truly require J.C. Penney?

As the department store chain declared bankruptcy defense Friday night, some concern if the company still has a location in American retail. Or if it could ever get better from the deadly blow it has been dealt throughout the coronavirus pandemic, which required its approximately 850 stores shut temporarily.

” You have this problem of the middle collapsing,” stated Steve Dennis, founder of retail group SageBerry Consulting and a Neiman Marcus method executive from 2004 to2008 “I believe conceptually there is just a location for one department store in the shopping mall.”

Penney, which was born in 1913 dealing with farmers in rural America, developed an iconic trademark name for itself, serving as a staple shop in numerous houses, particularly catering to women with households. Walmart and Target grew, stealing market share outside of the shopping mall. Then, the web exploded, with Amazon at the helm. Penney was late to adjust and buy its shops.

The Covid-19 crisis just worsened much of the obstacles it was already facing, consisting of an overhang of financial obligation.

Penney’s annual net sales contracted 8.1%to $107 billion in2019 That followed a 7.1%drop in 2018, a sales decline of 0.1%in 2017, and a drop of 0.4%in 2016, according to annual filings.

Some believed Penney would enjoy the benefits of Sears’ demise. Sears, another American retail icon, has actually been shuttering shops for several years and filed for bankruptcy in October2018 But still, Penney discovers itself in a sales slump, battling TJ Maxx, Target, Macy’s and others — in garments, home appliances and home products.

” I do not believe there is a place for J.C. Penney anymore,” said Robin Lewis, founder and CEO of The Robin Report and an expert to retail business. “Even if we didn’t have this virus … we have actually been over-stored for half a century in this country.”

This past holiday, sales online and at Penney shops open for a minimum of 12 months were down 7.5%. General department store sales decreased 1.8%from Nov. 1 through Dec. 24, according to Mastercard Spending Pulse. The drop took place even as holiday retail sales general grew 4.1%, the National Retail Federation stated.

And as retail sales tumbled 16.4%last month, their worst month-over-month drop ever tape-recorded, department stores were down 28.9%, according to fresh information from the U.S. Census Bureau. Year-over-year, outlet store sales were down 47%, totaling up to $6.1 billion, compared to $115 billion in April2019

An appearance back in time shows just how much department stores’ dominance in retail has waned.

In 1992, department store operators represented 14.3%of overall retail sales, omitting gas and vehicle dealer sales, according to data from the Commerce Department. That share was a paltry 3.7%since completion of in 2015.

America will emerge from the coronavirus pandemic with fewer outlet store, as Nordstrom has already stated it prepares to close 16 of them Additional closings by other chains are expected. It might also mean entire business, such as Penney, vanish.

” There’s method too much area chasing too couple of dollars,” Dennis said. “No one can consistently generate income.”

Penney said in its Chapter 11 filing that it has commitments for $900 million in funding from its existing first-lien loan providers to fund its insolvency, that includes $450 countless new money. It had around $500 million in cash on hand since the Chapter 11 filing date.

Penney included that in bankruptcy procedures it will “decrease its shop footprint” in stages. It said it prepares to divulge particular store details and timing in the coming weeks.

” Up until this pandemic struck, we had made considerable progress restoring our business,” Chief Executive Jill Soltau said in a declaration.

Another former outlet store executive sees a scenario where Penney dissolves– in addition to others consisting of Lord & Taylor, Neiman Marcus and Dillard’s — and only Macy’s, Nordstrom and Kohl’s are left standing.

” They are similar to Sears, there is no course forward,” Jan Kniffen, an expert to investors in retail companies and a former executive at The May Department Stores, parts of which were folded into Macy’s, stated about Penney. “I believe a great deal of shops will reopen long enough to go broke again.”

CNBC formerly reported that Penney has been dealing with a strategy that would contemplate closing 180 to 200 stores while in insolvency.

Penney is not alone in this circumstance, either.

High-end outlet store chain Neiman Marcus, the rural chain Phase Stores and clothing maker J.Crew have each applied for personal bankruptcy defense during the pandemic Phase strategies to liquidate its more than 700 stores if it can’t find a buyer. It runs under brand such as Gordmans, Bealls and Goody’s.

Home-goods company Pier 1 Imports and sporting-goods retailer Modell’s had actually filed for Chapter 11 security before the Covid-19 infection slammed the U.S. economy and forced nonessential merchants’ stores shut, consequently putting their going-out-of-business sales on hold. Modell’s has been in the process of liquidating its entire store base. Pier 1 was planning to emerge with a smaller sized footprint.

” Anything that has any opportunity of working would take many years and a lot of financial investment,” Dennis said. “In these personal bankruptcies, I think a great deal of them aren’t going to make it since investors are stating … this is too much of a long shot.”

— CNBC’s Lauren Hirsch contributed to this reporting.

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