J.C. Penney (NYSE:JCP) 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), Macy’s (NYSE:M), Nordstrom (NYSE:JWN) and The Gap (NYSE:GAP).
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, 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