J.C. Penney, one of America's most recognizable clothing stores, filed for Chapter 11 bankruptcy late Friday. In doing so, the 118-year-old store became the latest major retailer to succumb to a sales slump during .
J.C. Penney was one of many brick-and-mortar stores forced to temporarily close its locations as the pandemic spread across the U.S. The closures put J.C. Penney a step closer to bankruptcy, the company said Friday.
CEO Jill Soltau said in a statement Friday that J.C. Penney's leadership made significant progress toward rebuilding the company, but "the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt."
J.C. Penney officials said its physical and online stores will remain open during the bankruptcy restructuring. The company has already begun reopening some locations, including in Arizona, Florida, Georgia and Texas. The Plano-based clothing store filed for bankruptcy in the U.S. Southern District of Texas.
Although the pandemic further dented J.C. Penney, the store has been declining for years amid the growth in e-commerce, and is weighed down by $4 billion in debt. It has closed numerous stores in recent years to cut costs.
J.C. Penney has $500 million in cash and has commitments from lenders for another $900 million to help the company get through its structuring, company officials said. J.C. Penney plans to close more stores as part of the bankruptcy, but company officials didn't specify which ones or how many.
Soltau said bankruptcy "is the best path to ensure that JCPenney will build on its over 100-year history to serve our customers for decades to come."
J.C. Penney, which has roughly 85,000 employees, has now joined Neiman Marcus and J. Crew among the retailers to go bankrupt since the virus struck. In its most recent quarter J.C. Penney's sales fell nearly 8%, to $3.4 billion, from the year-ago period, while income was $27 million, down from $75 million a year ago. J.C. Penney missed two debt payments in April and May, which many analysts saw as a harbinger of bankruptcy.
"J.C. Penney actually embraced e-commerce earlier than most other U.S. department store chains, but the company did not capitalize on this head start," Bob Hoyler, senior research analyst at Euromonitor International, said in a statement to CBS News. "J.C. Penney has not been able to survive on its e-commerce sales alone during the pandemic, so the forced store closures represent months of revenue that will simply never be recouped."
The company's bankruptcy comes days after J.C. Penney gave its top executives millions of dollars in bonus pay. CEO Jill Soltau received $4.5 million, while chief financial officer Bill Wafford, chief merchant officer Michelle Wlazlo and chief human resources officer Brynn Evanson each got $1 million, the company disclosed in a May 10 regulatory filing.
Large companies give so-called retention bonuses to top executives to encourage corporate leaders to remain on board as the company restructures and, if possible, exit court supervision as stronger competitors.
J.C. Penney shares grew 21% after the market closed Friday, then fell by more than 30% during after-hours trading.