J.C. Penney Will Cut 900 Jobs

by InvestorPlace Staff | April 6, 2012 9:16 am

J.C. Penney (NYSE:JCP[1]) wants to be more like a start-up operation, which might be good news for customers, but not for some employees.

The 110-year old business will cut 900 jobs as part of its effort to cut $900 million in expenses by 2013 and complete a streamlining effort to their overall business model.

The staff reductions will take place in Penny’s Plano, Texas,   headquarters, where headcount will be reduced by 600, or nearly 13% of the total employees, and in their Pittsburgh call center, where the company will shutter the operation, with a loss of 300 positions.

Penny’s rolled out a new pricing structure on February 1 in an effort to bring back lost customers. The company has seen sales erosion from $19.8 billion in 2008 to $17.2 billion last year. Penny’s main retail competition comes from Target (NYSE:TGT[2]), Macy’s (NYSE:M[3]), Nordstrom (NYSE:JWN[4]) and The Gap (NYSE:GAP[5]).

The strategy included a three-tier pricing policy, and a redesign of their stores into smaller departments revolving around a central store location. The goal is to make pricing simpler, as the company no longer runs “sales”, but instead keeps to the three-tier pricing structure.

According to Forbes[6], New CEO Ron Johnson believes the cuts are an important step in the process of bringing back customers and revenues.

“We are going to operate like a start-up,” he (Johnson) said in a statement. “In our case, this has involved some very difficult decisions that have had an impact on many of our associates, but these changes are essential to help us achieve our long-term goals and, ultimately, grow our associate base as we grow our business.”

Investors reacted positively to the news, with shares jumping 25% in after-hours trading last night, however the stock is down nearly 5% for the year.

By Marc Bastow-Assistant Editor, InvestorPlace

 

Endnotes:
  1. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  2. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  3. M: http://studio-5.financialcontent.com/investplace/quote?Symbol=M
  4. JWN: http://studio-5.financialcontent.com/investplace/quote?Symbol=JWN
  5. GAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=GAP
  6. According to Forbes: http://www.forbes.com/sites/abrambrown/2012/04/05/j-c-penney-ceo-were-cutting-900-jobs-to-be-more-like-a-start-up/

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