* Stores being closed account for less than 5 pct of annual
* Q4 comp sales drop 0.7 pct vs est -0.5 pct
* Voluntary early retirement program for about 6,000
* Shares fall to more than a year low
(Adds details from conference call, updates shares)
By Sruthi Ramakrishnan
Feb 24 Department store operator J.C. Penney Co
Inc reported a bigger-than-expected drop in same-store
sales for the holiday quarter citing weak demand and competition
from online retailers, sending shares down to more than a year
The company on Friday also said it would shutter 130-140
underperforming stores over the next few months to focus on more
Penney's results underscored the brick-and-mortar retail
industry's struggles to overcome a drop in traffic in malls and
a shift towards online shopping.
To save cash, retailers have been cutting costs and looking
to make more money from their sprawling real estate assets.
Rival Macy's Inc said it was closing 100 stores and
exploring deals with other retailers to lease parts of its
Penney's comparable store sales fell 0.7 percent in the
fourth quarter ended Jan. 28, steeper than the 0.5 percent drop
analysts polled by research firm Consensus Metrix had expected.
The sales drop was the company's third quarterly decline
Penney also said that increased promotional activity and
handing out more coupons weighed on its margins, which fell 1
percentage point to 33.1 percent.
Costs related to rolling out its low-margin appliances
business to more stores also hit margins during the quarter.
In contrast Kohl's Corp and Nordstrom Inc
managed to keep a grasp on their margins by stocking less and
reining back on promotions.
"(Q4) store gross margin was negatively impacted by actions
we took with couponing and increased promotional activity...
These were poor decisions that will not be repeated," Chief
Executive Marvin Ellison said on a conference call.
Shares of the company, which operates more than 1,000
stores in the United States, fell 10 percent to more than a year
low of $6.18 in morning trading on Friday.
Penney on Friday said the stores being closed represent less
than 5 percent of annual sales.
The retailer also said it would sell a supply chain facility
in Buena Park, California to "monetize a lucrative real estate
asset" and close a distribution center in Lakeland,
Along with the closures, the company will also offer
voluntary retirement for about 6,000 employees in its
headquarters, stores and supply chain.
The company expects annual savings of about $200 million
from the cost cuts, but would incur a pre-tax charge of about
$225 million in the first half of the current year.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by
Sriraj Kalluvila and Shounak Dasgupta)