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A J.C. Penney store in Laguna Hills, California
Scott Mlyn | CNBC
For bankrupted J.C. Penney, a liquidation is “not in the cards,” according to the department store chain’s attorney.
Penney is moving forward with a sale that should be completed by this fall, attorney Joshua Sussberg of Kirkland & Ellis said during a court hearing Wednesday afternoon.
“I want to say, unequivocally, we have had not one discussion about a liquidation,” Sussberg said about Penney’s restructuring process. “It’s simply not in the cards.”
Sussberg called attention to a report earlier in the week from the New York Post that said the private-equity firm Sycamore was planning to make a $1.75 billion bid to buy the 118-year-old department store chain and merge it with rival Belk.
He called the story “ill-informed” and said, regarding Sycamore’s plans to merge Penney with Belk, “that is completely untrue.”
There are three separate bids being considered for Penney’s real estate and other assets, which would keep the retailer operating its own stores, Sussberg said.
The bidders include Sycamore, a duo of U.S. mall owners Simon Property Group and Brookfield Property Partners, and Saks Fifth Avenue owner Hudson’s Bay Co., according to a person familiar with these discussions. The person requested anonymity because the proposals remain confidential.
Sycamore declined to comment. Representatives from Simon, Brookfield and Hudson’s Bay did not immediately respond to CNBC’s requests for comment.
Kirkland’s Sussberg said during Wednesday’s hearing that a top bidder had yet to be chosen.
Penney filed for Chapter 11 bankruptcy protection on May 15, weighed down by debt and battered by the coronavirus pandemic.
Earlier this month, the company announced it would be laying off roughly 1,000 employees, as it moved forward with shutting about 150 locations across the U.S. When the retailer filed, it was still operating about 860 stores.
Penney said Wednesday that all stores have since reopened, after being temporarily shut due to the Covid-19 crisis.
It said its off-mall locations, of which it has 173, continue to perform better than its stores in enclosed shopping malls, of which it has 520. Sales at off-mall stores are down about 26%, while sales at Penney stores in malls are down about 33% since they have opened, it said.
The department store chain continues to talk to its landlords to negotiate better rents, according to Sussberg, which is allowing the company to cut costs.
Forty retailers including Penney have filed for bankruptcy in 2020, according to a tracking by S&P Global Market Intelligence. The list is still expected to grow.
A number were already struggling prior to the Covid-19 crisis slamming the U.S. economy, forcing shops deemed nonessential and malls to be boarded up. The pressures have only intensified since for an industry already undergoing seismic shifts in consumer behavior and preferred shopping destinations. Department stores’ dominance in retail has been waning.
According to Sussberg, Penney aims to have “mass consensus” regarding its go-forward strategy by next month.
