J.C. Penney in Financial Trouble but Makes Up with Beauty Partner, Sephora
The Dallas Morning News | May 7, 2020
J.C. Penney resolved outstanding legal issues with Sephora last Thursday, May 7th - just one day shy of the day they were said to meet in court.
The two retailers were scheduled to meet in U.S. District Court on Friday, May 8th to dissolve a temporary restraining order that prohibits the beauty brand from pulling out of more than 650 Penney stores before the end of their contract, which ends in 2024. Instead, the two companies said they "reaffirmed" their 14-year relationship and have "agreed to mutually beneficial revisions" to their joint operating agreement, according to a joint press release. They provided no details.
Unfortunately for J.C. Penney, the feud with Sephora is only one of the battles they are facing - and they're financial battles are much larger. According to Penney spokeswoman Brooke Buchanan, the retailer made the strategic decision to not make a $17-million interest payment due May 7th and take advantage of the grace period to continue ongoing constructive discussions with lenders and maximize financial flexibility.
Most industry analysts expect that Penney will be forced to file for Chapter 11 bankruptcy soon. The company has both a debt issue — $4 billion in long-term debt — and stores in malls that have either lost their positions in suburban markets or are in smaller cities with less potential for growth.