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You can expect more JC Penney store closures in 2020 and beyond

Key Points
  • J.C. Penney says it will close just 18 department stores, in addition to nine home and furniture shops, in 2019.
  • Analysts say there could be more on the horizon.
  • Penney Treasurer Trent Kruse says: "I think that's a fair read."
Signage is displayed outside a JC Penney Co. store in Chicago, Illinois.
Christopher Dilts | Bloomberg | Getty Images

J.C. Penney says it will close 18 department stores and nine home and furniture shops in 2019.

That's a far cry from the predictions some analysts were making, which called for more than 100 additional stores to go dark this year.

The retailer is still operating more than 800 locations across the country, and that's likely too many, as fewer shoppers head to antiquated malls to shop. And the department store sector as a whole is increasingly under pressure, with the brands found within those stores selling more directly to consumers as additional sales move online to behemoths like Amazon and Walmart.

J.C. Penney's management team on Thursday said additional store closures are a possibility in 2020 and beyond.

"I think as we go forward — as we mentioned, we're closing 18 [department stores] this year," Treasurer Trent Kruse told analysts. "I think it's safe to assume that as you roll into 2020 and future years, it's likely to see some continuation of that effort. [It's] hard to say now, but I think that's a fair read."

The department stores set for closure during the fiscal second quarter of this year are in "tough locations" and are "less productive" when compared against the rest of Penney's fleet, Kruse said. The company is anticipating recording a pretax charge of about $15 million associated with these closures. It declined to provide a list of locations. A spokesperson said the closing stores employ more than 1,000 people, many on a part-time basis.

Penney has been in the process of trimming its real estate for years now. It closed 138 stores in 2017. It closed eight stores last year.

Department store chains altogether — including Penney, Sears, Macy's, Dillard's and Belk — account for more than 350 million square feet of mall space across the U.S., according to a report late last year from real estate advisory firm Green Street Advisors. Those department stores could fill up 350 average-sized malls — by themselves — Green Street said. Their reach is massive.

Penney's footprint — with more than 800 stores — in particular is massive compared with its peers. That's part of the reason why more store closures by the retailer seem inevitable. Nordstrom has less than 150 full-line department stores today. Local chains like Dillard's and Belk have fewer than 300 locations, each. Sears, since emerging from bankruptcy, continues to shrink. Macy's has about 680 department stores, including those labeled as Bloomingdale's.

Penney on Thursday said net sales fell 9.5 percent during the fiscal fourth quarter and 7.1 percent in fiscal 2018. Sales have fallen for three consecutive years, now. With its new CEO, Jill Soltau, Penney hopes the steps it's been taking so far — like getting out of the appliance business and investing more in apparel — will turn things around.

"I am very pleased with the level of support from our current vendors as well as potential new partners we are meeting with, who are excited to do business with us and are proposing new ideas brands and initiatives to J.C. Penney for consideration," Soltau, who took over as CEO in October, said. "Based on everything I have seen and heard I'm even more convinced that we can establish a path to sustainable profitable growth."

Penney shares surged nearly 30 percent Thursday, on the heels of its earnings report. The stock was last trading around $1.60, bringing the company's market cap to about $501 million. Shares have still fallen 70 percent over the past 12 months.