JCP closes stores as AMZN eyes Retail assets
Much of JCP's nearly $1 billion in Retail real estate may suit AMZN
As the war for the future of retail rages, land acquisition continues to be the predominant theme of each new battle. The latest news has much-beleaguered J.C. Penney (JCP) announcing it will permanently shutter 242 retail locations in the United States over the next 18 months.
JCP says this move will focus the company on its most profitable locations, more e-commerce offerings, and adapting its supply chain and fulfillment options to pandemic era consumerism. This has led to immediate speculation as to other retailers, or perhaps commercial real estate investors hedging their retail holdings, that may pick up the physical assets JCP will need to liquidate.
The JCP real estate portfolio is considerable; some $910 million in owned and leased assets in the United States. But they are not all in good locations and the retail and industrial RE markets are evolving quickly.
Amazon (AMZN) may well be interested in JCP's assets that are well-located to support AMZN's robust delivery and fulfillment needs. The old shopping mall locations and warehouses will need significant investment to become safe, efficient and intelligent, but Jeff Bezos has the time and the money.
Whatever JCP's plan is for these 242 locations and their other properties, the retailer needs to act now. As GlobalData Retail pointed-put in a recent report, JCP is unusually exposed to malls in weak locations (read as: footfall will recover slowly, if at all, in these locations).
This is not to say that JCP's assets are valueless. Commercial real estate of all types is in the midst of a squeezed market, and that's bringing all the big boys the yard.
The aggressive moves of traditional commercial real estate investors Brookfield Asset Management (BAM) and Simon Property Group (SPG) - who have committed $5 billion to take non-controlling shares in suffering retail stocks - and vertically-integrated retailers with strong real estate portfolios such as IKEA, indicate that the competition for prime retail, manufacturing and intelligent warehousing space is alive and well.
In order to make these pandemic-era market conditions work for them, JCP will have to do two things it has struggled to for the last decade: innovate and make data-driven decisions.
J.C. Penney will live to play another day in some new incarnation of itself, perhaps via acquisition in whole or part by the likes of an Amazon, or another company that understands the mechanics and supply chains of e-commerce.
But JCP's tenure as a leading American retail brand is officially over.