UPDATE 1-J.C. Penney to shed 33 stores, cut 2000 jobs as part of turnaround

Wednesday, 15 Jan 2014 | 4:55 PM ET

NEW YORK, Jan 15 (Reuters) - J.C. Penney Co Inc said on Wednesday it will close 33 underperforming stores and cut 2,000 jobs as part of the struggling department store chain's efforts to return to profitability.

Penney, which operates about 1,100 mid-market department stores in the United States, suffered a 25 percent drop in sales in fiscal 2012 after a failed attempt to go upmarket.

It has been trying to win back customers with deep discounts and the return of popular in-house brands. Sales started ticking up in the autumn after nearly two years of monthly sales drops.

But a press release with scant details on its December sales raised concerns that the turnaround stalled during the key holiday season. It is still clearing out unsold merchandise from last year's failed reinvention at large discounts, pressuring its gross margin.

Analysts expect Penney to report a 70-cent per share loss for the holiday quarter, according to Thomson Reuters I/B/E/S.

Chief Executive Myron Ullman called the move an "important step" that "addresses a strategic priority to improve the profitability of our stores."

The closings will generate cost savings of $65 million per year, beginning in 2014. Penney expects estimated pretax charges of about $26 million in the current quarter.

The stores closing include five in Wisconsin, where archrival Kohl's Corp is dominant, three in Pennsylvania, and two in Florida.

The struggling department store chain had 116,000 employees as of Feb. 2, 2013. That was about 40,000 fewer than a year earlier as the company tried to cope with lower sales.

Shares were down 0.8 percent at $6.95 in after-hours trading.

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