US department store chain J.C. Penney Co. has laid off 900 employees in an effort to cut costs. The majority of the jobs cut where at the Plano, Texas, headquarters. The remaining 300 positions will be cut July 1 when the company’s Pittsburgh, Pennsylvania, call center closes.
The cuts represent 14% of the 4,400 employees at company headquarters. No senior executives were affected by the cuts.
Spokeswoman Darcie Brossart says the Pittsburgh call center was chosen for closure because its call volume is down 30%. Call centers in Columbus (Ohio) and Milwaukee (Wisconsin) will remain open.
"We are going to operate like a start-up…. We are going to be nimble, quick to learn, quicker to react and totally committed to realizing our vision to become America’s favorite store,” Chief Executive Officer Ron Johnson said in a press release.
In January, J.C. Penny cut 23,000 seasonal employees.
JCP Restructuring Needed To Remain Competitive
The job cuts come as part of Johnson’s restructuring, who was named CEO in November 2011. Investors were told earlier this year that the levels of management at the chain’s headquarters will be reduced.
Investors were also told the company intends to cut $900 million in expenses within two years, with J.C. Penney specifically aiming to save $300 million in advertising, $400 million in store operations and $200 million on headquarter-level operations.
The overall goal is to reach a target where expenses are 30% lower than sales by 2014.
The economy has hit hard at J.C. Penney’s customer base, and in recent years, J.C. Penney has been unable to compete against rival Macy’s Inc. In an effort to counteract this, several changes were unveiled earlier this year in February.
The most noticeable change is a new pricing strategy. Johnson has eliminated coupons and hundreds of sale events in favor of reducing prices storewide permanently by about 40%, offering month-long specials and only offering clearance sales two days out of the month. Customers can now also return items without a receipt and without a time limit.
Stores will also be rearranged into 80-100 brand shops around a “town square” where customers will be offered advice and services.
Although Johnson says it is too early to jump to conclusions, sales for February were down compared to 2011.
Key Statistics - US Retail Industry (source: MarketLine)
- In 2011 in the United States, the apparel retail industry had revenue totaling close to $330 billion. Over 2007- 2011, this represents a compound annual growth rate (CAGR) of 2.7%.
- In 2011, the apparel industry's most lucrative segment was women’s wear, with revenue totaling over $170 billion. This is equivalent to nearly 52% of the industry's overall value.
- For the five-year period over 2011–2016, it is predicted the performance of the industry will accelerate. A CAGR of more than 3% is anticipated. By the end of 2016, the apparel industry is expected to have a value of close to $384 billion.