J.C. Penney closings reflect retail shake-up

Joan Verdon/The Record - The news that J.C. Penney is planning to close up to 140 of its stores this year doesn’t mean department stores are dead – yet. But it is a sign of their diminished importance in the malls of North Jersey, and America.

Penney’s announcement Friday follows several rounds of store closings in recent years by the country’s other biggest mall-based department store chains, Sears and Macy’s. Mall owners in North Jersey and elsewhere have gotten the message and are preparing for a post-department store era by seeking out movie theaters, entertainment arcades and food halls as the new stars to anchor their shopping centers.

J.C. Penney, based in Plano, Texas, hasn’t said yet where the stores on its closing list are located, and they don’t plan to release that information until mid-March. Retail experts, however, said it is unlikely that any of the four J.C. Penney stores in North Jersey will be on the list.

The stores slated to close make up 14 percent of J.C. Penney’s store fleet, but only account for 5 percent of the company’s sales, a sign that the stores on the list probably are the chain’s lowest sales-volume locations, said retail consultant Jeff Green, president of Jeff Green Partners in Phoenix.

The closing stores are likely to be in small-market locations, and J.C. Penney didn’t really open small-market stores in New Jersey, Green said, as it did in parts of the Midwest and West.

Jersey stores

“New Jersey in general is a strong, strong retail market,” he said. Of the North Jersey stores -- in Paramus, Wayne, Jersey City and Rockaway -- “I can’t see any of these stores closing,” Green said.

The store at Rockaway Townsquare Mall might be the most vulnerable of the four, he said, because its location is less suburban than Paramus or Wayne. Elsewhere in New Jersey, the Toms River store could be vulnerable for the same reason, he said.

J.C. Penney announced the store closings on the same day it told investors “they’re being proactive,” Green said. “They’re not resting on their laurels, and they’re closing stores sooner than Macy’s or Sears did,” he said.

J.C. Penney has improved its results in recent years by being more creative about how it uses its large department-store space. It brought in cosmetics retailer Sephora to manage its beauty departments and is pursuing similar arrangements with other brands.

Survival strategies

Department stores, to survive in the future, may need to adopt an approach similar to that of electronics retailer Best Buy, which has used its existing big-box real estate to bring in brands such as Apple, Microsoft and Samsung as stores within a store.

“Bringing well-established brands into your store not only is a way to bring in customers, but also is a way to better use the square footage that’s already there,” Green said.

J.C. Penney said in its store-closing announcement that it was committed to keeping “a large store base,” and that having large numbers of physical stores gives it a competitive advantage in the new retail age. But the company said it wants to trim its store number to focus on those stores that are the best destinations to draw shoppers. The company has more than 1,000 stores in the United States and Puerto Rico.

Factors other than store performance could decide the fate of the J.C. Penney stores in North Jersey, if any of the malls wants to reclaim space for a new tenant. The Shops at Riverside in Hackensack last year welcomed the closing of the Saks department store as an opportunity to bring in an upscale movie theater, restaurants and luxury boutiques. That project, under construction, is expected to open this year.

At Willowbrook Mall in Wayne, half of the Sears department store is being converted to a Dave & Busters restaurant and gaming arcade, with Sears taking a smaller space.

Other Sears stores, including one in Freehold, have been divided to make room for up-and-coming new mall tenants, such as Irish retailer Primark, which moved into the Freehold Sears.

'Restructuring of retail'

Veteran retail analyst Howard Davidowitz said the news from J.C. Penney reflects larger problems retailers are facing – lackluster economic growth, more online shopping, fewer shoppers in stores.

“What we’re in is the second inning of a restructuring of retail,” Davidowitz said. “It’s only just starting. It’s got a long way to go,” with a major shake-up that will involve more store closings and retail failures.

“It’s not just the department stores, although there is tremendous focus on them,” he said.

“We have three times as many square feet of stores for every person in America than Japan, than France, than England have.

“We’re tremendously over-stored. All of the growth is online.

“What happens is what’s happening. It means that you’ve got to shake things out.”