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JCPenney to close 44 full-line stores

PLANO, TX -With its sales, profits and stock price all heading south, troubled retailer J.C. Penney Co. said it will shutter 44 full-line department stores, affecting 5,000 sales jobs and putting 300 headquarters workers out of a job.

Picking up the tab for the sweeping overhaul of operations, Penney said it will take a $275 million pre-tax charge against fourth-quarter operations, clipping profits by 68 cents a share.

The company is scheduled to report fourth-quarter results on Feb. 22.

Allen Questrom, new chairman and ceo, and the man handed the tiller of the foundering retail ship, said, "The company's cash flow and liquidity remain strong. This restructuring program is an important step in our plan to improve future performance and enhance shareholder value. Our management team is committed to becoming more efficient and effective in providing value to our customers while increasing bottom-line results."

Putting another big dent in the fourth-quarter bottom line, Penney had already said results will be hurt by the non-comparable effect of inventory markdowns, which are not included in the restructuring charge. The markdowns will reflect the narrowing of assortments and the discontinuation of some merchandise at both JCPenney stores and its Eckerd drug store unit.

In addition to 44 under-performing full-line department stores, Penney said it will also shut down three catalog outlet stores. The retrenchment will eliminate about four million gross square feet at the retail giant, the nation's largest retailer of home textiles products.

And that, in turn, could have a further chilling effect on the home textiles suppliers, whose products had stocked the shelves of the Penney stores that are set to disappear, a group of suppliers already rocked by the earlier closing of the Montgomery Ward and Bradlees chains and the voluntary bankruptcies, and attendant store closings, at two specialty retail chains, Strouds and Home Place.

Penney said the majority of the stores will close their doors during the first half of this year. The shutdown will lop off about $350 million in annual sales on an annualized basis, about $230 million during 2001.

Breaking out the $275 million in restructuring charges by retail segment, Penney said JCPenney stores will account for about $185 million in mostly non-cash costs, while the Eckerd's drug store chain will account for another $90 million. A major portion of the $185 million charge stemming from the restructuring of department stores represents store closing costs, such as asset write-offs and future lease obligations. The remainder includes asset impairments and work force reductions.

The $90 million in Eckerd charges consists primarily of a contract termination, staff reductions and asset write-offs. The contract termination charge relates to the exit from a long-standing arrangement with Eckerd's information systems provider.

A staff reduction program has affected about 265 workers at Eckerd's headquarters and field organization. The asset write-offs at Eckerd's reflect a portion of Eckerd's investments in e-commerce development, which is no longer a near-term strategic focus for the drug stores.

Asset write-offs also include the closing of the majority of catalog desks in Eckerd drugstores. About 100 Eckerd catalog desks will remain open.

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