The last two months have seen several retail chains file for bankruptcy (Art Van Furniture, Modell’s Sporting Goods, True Religion, and most recently J.Crew ), with speculation that many more may follow in the weeks and months ahead including J.C. Penney.
Certainly, the current COVID-19 pandemic is sending shock waves through the retail world, leaving stores shuttered with little or no income to offset fixed costs. However, in many cases these troubled retailers were experiencing long-term viability challenges long before coronavirus became a household term. J.Crew had struggled with its debt load for the past few years, and had contemplated spinning off the relatively strong Madewell brand last year in an effort to stay afloat.
J.C. Penney has faced its own challenges over the past few decades, following a long and tortured path to “rediscover” itself and find its place in the retail world as sales continued to erode. From the full makeover under Ron Johnson to the re-introduction of appliances under Marvin Ellison, J.C. Penney has tried to shake off the slow, inevitable decline of the department store industry – a decline accelerated by factors ranging from the increased consumer shift towards the e-commerce channel to the increased competitive impacts of various off-price retailers. If J.C. Penney does file for bankruptcy, COVID-19 will be cited as the primary reason for its demise. In reality, the pandemic will simply have been responsible for accelerating the timing of a bankruptcy filing.
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