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J.C. Penney to shut 130 to 140 stores

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Customers ride the escalator at a J.C. Penney store in New York Aug. 14, 2013. Brendan McDermid / Reuters2 / 2

Department store operator J.C. Penney Co. Inc. said on Friday, Feb. 24, it would close 130 to 140 stores over the next few months, and reported a bigger-than-expected drop in same-store sales for the holiday quarter.

Shares of the company were down 2.6 percent in premarket trading on Friday, after initially rising 3 percent.

The company said it would also initiate a voluntary early retirement program for about 6,000 employees from among its home office, stores and supply chain personnel.

Fortune reported the list of stores closing would be announced in March.

J.C. Penney also said it would sell a supply chain facility in Buena Park, Calif., to "monetize a lucrative real estate asset" and close a distribution center in Lakeland, Fla.

J.C. Penney's store closures come after larger rival Macy's Inc. said in November it would shut 100 stores, as department stores struggle with weak demand for apparel and growing competition from online retailers. "We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers," Chief Executive Officer Marvin Ellison said in a statement.

The stores being closed were underperforming and represent about 13 percent to 14 percent of J.C. Penney's store base and less than 5 percent of annual sales, the company said.

J.C. Penney said it expected annual savings of about $200 million from the cost-cutting measures, and would take a related pre-tax charge of about $225 million in the first half of the current year.

Sales at stores open more than a year fell 0.7 percent in the fourth quarter ended Jan. 28, bigger than the 0.5 percent drop estimated by analysts polled by research firm Consensus Metrix.

While lower inventories helped rivals Kohl's Corp. and Nordstrom Inc. keep promotions low and margins up, J.C. Penney said it promoted more and ended the quarter with 4.9 percent higher inventory.

The company's gross margin fell 1 percentage point to 33.1 percent, also hurt by the roll out of its low-margin appliances business to more stores.

However, a fall in certain expenses helped J.C. Penney report an adjusted profit of 64 cents per share, beating the average analysts' estimate of 61 cents, according to Thomson Reuters I/B/E/S.

J.C. Penney also reported its first annual adjusted profit in five years.

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