What mall owner David Simon just said about J.C. Penney

Simon Property Group CEO David Simon says he is “very pleased” with J.C. Penney’s results so far but acknowledges it’s “still a work in progress.”

By guest author Maria Halkias from the Dallas Morning News

Captions courtesy by Dallas Morning News

The department store chain is working to improve low morale among its workers and rebuild vendor and landlord relationships that were “burned” in its 2020 bankruptcy, Simon said during a conference call with analysts late Monday. He also said Penney may start selling brands that Simon owns through partnerships, such as its recent acquisition of Eddie Bauer with Authentic Brands Group.

In partnership with Authentic Brands, Simon bought Forever 21 out of bankruptcy and earlier acquired Aéropostale. Authentic Brands owns more than 30 brands, including Juicy Couture, Nine West and Brooks Brothers.

“When we buy a retailer out of bankruptcy, we’re in the stabilization mode and the capital preservation mode. We’ve accomplished both of those already,” Simon said.

Simon and Brookfield Asset Management, the two largest U.S. mall operators, bought Penney out of bankruptcy last year in a transaction valued at USD 1.75 billion with the assumption of debt. The owners recently cut 650 jobs at Penney, including 100 in local corporate operations.

Penney is in the process of closing 18 stores by May 16, adding to the 156 it shut down during the bankruptcy, which will leave it with 672 stores. Simon said Penney still has USD 1.2 billion in cash and no borrowing on its credit line.

Simon said that while more new brands are coming to Penney — the retailer recently added three home brands, including Fieldcrest — there’s still a lot of trust to rebuild post-bankruptcy.

The new owners are “giving the vendors comfort that we’re going to be around and able to pay for the goods,” he said. “And we’re seeing more and more confidence from the vendor community.”

Simon also shed some light on what the new owners plan to do with the 119-year-old department store chain.

He said there are opportunities through Simon’s 4-year-old partnership with Authentic Brands, called SPARC Group, as well as with brands Authentic owns separately.

“I think it’s not just SPARC brands but it could be ABG brands. Remember ABG owns a lot — they have the IP for a lot of different brands. So the answer is without question … it takes time obviously to design it, manufacture it and get it in there,” Simon said. “But I would think in 2022, maybe even late 2021, we’ll start to see a lot of the ABG brands end up in J.C. Penney.”

Lifting Penney’s employee morale is “harder to do in COVID when people are working remotely,” he said. “I’ve been proud of the execution and so far the results. Our plan is above where we thought it was going to be.”

Buthe conceded the task of turning “Penney into a 21st century retailer, that’s still work in progress.”

Simon made his comments as Simon Property Group reported a first-quarter revenue decline of 8 % to USD 1.24 billion from a year ago and a 1.8 % increase in profit to USD 445.9 million while raising its outlook for the year as it digs out of the pandemic-led temporary and permanent store shutdowns.

Simon’s average mall occupancy in the quarter was 90.8 % as of March 31 vs. 94% a year ago and a recent peak of 95.1% in March 2019.