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J.C. Penny reveals cost-cutting plan

PLANO, Texas — J.C. Penney Inc. yesterday outlined how it plans to cut $200 million in costs from its department store, Internet and catalog business.

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 phase in over several years, the company said. Penney will 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. However, the company continues to estimate fourth-quarter earnings of 80 cents per share, including the one-time charges.

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