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Penney Announces Massive Layoffs, Closes 47 Stores
By David Koenig   Associated Press
PLANO, Texas — J.C. Penney Co. Inc. said Thursday it will cut 5,300 jobs, or about 2 percent of its work force, and close 47 stores as part of an effort to boost profits at the long-struggling retailer.

AP/Wide World
Allen Questrom, new CEO for J.C. Penney, Inc.

The stores being closed include 44 underperforming department stores and three catalog outlets, Penney said. Most will be closed in the first half of the year, the company said.

The Plano-based retailer operates about 1,100 Penney department stores.

The closings will eliminate 5,000 store jobs and 300 jobs in headquarters and field offices — about 2 percent of the company's work force of 290,000 employees. Penney said an undisclosed number of store employees could be offered other jobs.

Penney said it would take a charge of $275 million, which amounts to about 68 cents a share after taxes, in the quarter ending Jan. 27.

Thursday's announcement marked the second recent round of store closings. Last year, the company announced it would close 45 department stores.

Once an icon for middle-class shoppers, Penney has been in a years-long slide amid tough competition from discounters and trendier retailers. Analysts blamed the company's prior management for offering stale fashions and failing to respond to changes in consumer tastes.

Chairman and chief executive Allen Questrom, a veteran retail executive who took over at Penney in September, tried to assure investors and employees that the company's cash flow and liquidity remain strong.

"This restructuring program is an important step in our plan to improve future performance and enhance shareholder value," he said in a statement issued by the company.

A Penney spokeswoman said Questrom would not comment further on the moves until Feb. 22, when the company reports results from its fiscal fourth quarter.

Closing the stores will mean a loss of about $230 million in sales this year and $350 million annually after that, the company said.

Penney issued a list of 39 of the 47 stores to be closed, saying the others would be identified later this year. Employees at the affected stores were notified beginning last week.

Four of the closing stores are in Indiana and three each are in Illinois, North Carolina and Texas.

Many are in smaller towns, such as Susanville, Calif., and Pratt, Kan. A few are in urban and suburban malls, such as Town and Country Mall in Houston and Southwest Center Mall in Dallas.

Penney said it also would close most of the catalog desks within its Eckerd drugstores. Only 100 drugstores of the approximately 2,650 Eckerds will continue to offer catalog sales, the company said.

Earlier this week, Eckerd officials said they would close five to seven drugstores this year, which they termed part of a normal review of store performance. Penney officials said they have not identified which drugstores will be closed.

The fourth-quarter charge against earnings will include $185 million for shuttering department stores and $90 million for the Eckerd changes.

In the third quarter, Penney suffered $23 million in operating losses, and officials have warned that the holiday season was marred by disappointing sales and heavy price markdowns.

In later-morning trading Thursday, Penney shares fell 13 cents to $12.69. Penney stock has slid more than 80 percent since mid-1998.

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