After firming up plans to sell itself to mall owners Simon Property Group and Brookfield Property Partners, J.C. Penney Co. Inc. on Thursday posted second-quarter results evidencing the deep impact of COVID-19 — as well as other longer-term challenges — on its business.
The company, which sought Chapter 11 protection in May as the pandemic took hold across the United Sates, said in a U.S. Securities and Exchange Commission filing that its sales tumbled 44% to $1.4 billion during the period ended Aug. 1. It also widened its net losses to $398 million, or $1.23 per diluted share, compared with the comparable period’s losses of $48 million, or 15 cents per share.
The dismal results — not dissimilar to those posted across much of retail as the global health crisis forced the temporary closure of nonessential retailers in March and April — came one day after the company inked a deal to sell its business to mall giants Simon and Brookfield for $1.75 billion.
In addition to the selling its operations, JCPenney is forming a separate real estate investment trust and a property holding company, including 161 of its real estate assets and all of its owned distribution centers.
“We have determined that an agreement with Brookfield and Simon, as well as the formation of separate real estate investment trusts owned by our first-lien lenders, is the best path forward to maximize value for our stakeholders, ensure we keep the most stores open and associates employed and position JCPenney to build on our over 100-year history,” CEO Jill Soltau said in a statement on Wednesday. “The interest in our operations reflects our company’s strength and our loyal customer base.”
As the stalking-horse bidder, Simon, Brookfield and the first-lien lenders are expected to complete the sale ahead of the 2020 holiday shopping season. According to JCPenney attorney Joshua Sussberg of Kirkland & Ellis, the deal is expected to keep intact more than 600 stores and 70,000 jobs.
After struggling for several years amid declining sales, numerous leadership changes and increased digital competition, JCPenney filed for Chapter 11 protection on May 15. It obtained $900 million in debtor-in-possession financing to aid operations and expects to close 242 doors, or about 29% of its fleet, by February.