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J.C. Penney outlines cutbacks

J.C. Penney Inc. promised investors last year there was at least $200 million in costs it could trim from its department stores, Internet and catalog business. Late last week, it outlined how it plans to wield the scalpel.

Penney will shut down its catalog telemarketing center in Austin during the second quarter of 2004, eliminating 475 positions in the process. Call volume will be reallocated to its remaining nine telemarketing centers.

Management will be brought in-house for six store-support centers now handled by third-party vendors.

Penney will continue to restructure operations and support functions in its on-going centralization project, eliminating some resources along the way.

In marketing initiatives, the company will drop less productive programs and pare overall production cuts.

Some savings will be reinvested in media that better support sales growth.

Although savings are expected to begin this year, the cost-reduction program will be phased in over several years, the company said.

"With centralization well under way and technology now in place, we are able to concentrate our efforts on creating a more competitive cost structure," said Allen Questrom, chairman and CEO.

Of the $100 million in annualized savings anticipated from the strategy, $50 million should occur in 2004, the company said. Penney will also take a charge of approximately $20 million (4 cents per share) in the fourth quarter of fiscal 2003 to cover the launch of the program.

The charges are primarily tied to contract cancellations, severance and outplacement services, the company said.

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