J.C. Penney (JCP) will fire 2,000 people and close 33 underperforming stores as part of a revamped turnaround plan it hopes will stem ballooning losses.
The struggling department-store chain said late Wednesday the move will generate annual savings of roughly $65 million beginning in 2014. Penney expects to incur charges of $26 million in the fourth quarter and $17 million in future periods related to severance and closure expenses.
"As we continue to progress toward long-term profitable growth, it is necessary to re-examine the financial performance of our store portfolio and adjust our national footprint accordingly," J.C. Penney CEO Mike Ullman said in a statement.
Shares of the retailer fell more than 2.5 percent to $6.83 in after-hours trade following the announcement. They have fallen more than 62 percent over the last 12 months.
The move comes nearly two months after the company reported a much deeper third-quarter loss on weaker-than-expected sales.
Penney says the remaining inventory in those stores will be sold over the next several months, with final closing anticipated by early May. It still plans to open a new store later this year in Brooklyn, N.Y.
17 Tricks Stores Use to Make You Spend More Money
J.C. Penney to Shutter 33 Stores, Slash 2,000 Jobs
A big, bold "SALE" sign helps get people in the store, where they are likely to buy non-sale items.
Once you enter, there's the shopping cart. This invention was designed in the late 1930s to help customers make larger purchases more easily.
In supermarkets, high margin departments like floral and fresh baked goods are placed near the front door, so you encounter them when your cart is empty and your spirits are high.
Flowers and baked goods also sit near the front of stores because their appealing smell activates your salivary glands, making you more likely to purchase on impulse.
Supermarkets like to hide dairy products and other essentials on the back wall, forcing you to go through the whole store to reach them.
Once customers start walking through a store's maze of aisles, they are conditioned to walk up and down each one without deviating.
Most stores move customers from right to left. This, combined with the fact that America drives on the right, makes people more likely to purchase items on the right-hand side of the aisle.
Anything a store really wants customers to buy is placed at eye level. Particularly favored items are highlighted at the ends of aisles.
There's also kid eye level. This is where stores place toys, games, sugary cereal, candy, and other items a kid will see and beg his parents to buy.
Sample stations and other displays slow you down while exposing you to new products.
Stores also want items to be in easy reach. Research shows that touching items increases the chance of a purchase.
Color affects shoppers, too. People are drawn into stores by warm hues like reds, oranges, and yellows, but once inside cool colors like blues and greens encourage them to spend more.
Hear that music? Studies show that slow music makes people shop leisurely and spend more. Loud music hurries them through the store and doesn't affect sales. Classical music encourages more expensive purchases.
Store size matters, too. In crowded places, people spend less time shopping, make fewer purchases (planned and impulsive), and feel less comfortable .
Stores not only entice you with sales, they also use limited-time offers to increase your sense of urgency in making a purchase.
The most profitable area of the store is the checkout line. Stores bank on customers succumbing to the candy and magazine racks while they wait.
Finally, there is the ubiquitous "valued shopper" card. This card gives you an occasional deal in exchange for your customer loyalty and valuable personal data.