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J.C. Penney To Again Slow Store Openings

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Jun 25, 2008 12:08 pm US/Central

J.C. Penney To Again Slow Store Openings

PLANO (AP) ― J.C. Penney Co. will further slow the pace of new department store openings and cut capital spending next year because of the weak economy.

The company said Wednesday it now plans 20 new or relocated stores in 2009, down from the 36 it expects to open this year.

Penney had once planned 50 new stores a year through 2011, but backed away from that goal in April, when it set the target of 36 new stores this year.

Penney and other retailers have been slumping as their middle-class customers struggle with higher gasoline prices, a slowing economy and a weak housing market.

Chief Executive Myron E. Ullman III said Wednesday that the Plano-based chain expects next year "to remain very challenging for the American consumer."

Ullman said the company just completed its strategic planning for 2009 and decided to cut capital spending to about $650 million, compared with $1 billion expected this year and $1.2 billion last year.

The reduced store openings will help the company cut capital spending. Penney also will renovate fewer existing stores -- 10 to 15 next year, down from the 20 it expects to renovate this year. The company had originally planned to refresh 65 stores per year through 2011.

Penney did not say where it would delay building new stores, but it said it still planned to open its first store in Manhattan late next year. It believes the store will be the sales leader in the chain.

Penney also said it would continue to control inventory levels below 2007 levels by the end of the back-to-school season.

Ullman said the moves could help blunt the impact of the "difficult retail environment" and boost gross profit margins over the year before. But even after controlling operating expenses, the company said it would face pressure from lower sales.

Penney executed a successful turnaround earlier this decade, lifting sales through a line of private-label clothing brands aimed at women and teens and adding a touch of class with items such as cashmere and Sephora cosmetics counters.

This year, the chain made its biggest launch, a line of home furnishings and other goods from Polo Ralph Lauren Corp. called American Living, at higher prices than typically found in a Penney store.

Penney operates more than 1,000 stores in the United States and Puerto Rico and has 155,000 employees.

Shares of Penney rose $1.52, or 4.1 percent, to $38.40 in midday trading.

(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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