JCPenney was in trouble long before COVID-19 showed up

COVID-19 will get the blame, and rightly so, for the recessionary damage done to the American economy and just about every sector within it.

But in many cases the coronavirus didn’t create the problems. Just as the virus itself does its worst with those who have existing health vulnerabilities, so too does COVID-19 in economic terms serve as the accelerant to a fire that something else had long ago lit.

Commercial aerospace, specifically Boeing, was in trouble well before COVID-19 amplified its problems and spread them to the rest of the industry. Media companies were already struggling with the issue of building sustainable business models when COVID-19 showed up with a sledgehammer to whack a way at two of the few supports, advertising and events, propping them up.

So it has been with bricks-and-mortar retailing, as highlighted by the latest casualties. Pier 1 Imports is giving up the fight, closing its stores. Neiman Marcus and J.Crew have both filed Chapter 11 bankruptcy-court petitions.

And in the biggest news of all, JCPenney has also opened a location in Chapter 11.

JCPenney (that’s the company’s style – maybe they sold off the punctuation to raise cash) has been ailing and in turmoil for years, but as much an iconic American retailing brand as it was, it always seemed to be overshadowed by an even bigger, more iconic department-store brand that was even more of a financial and strategic mess – Sears.

Sears was the one with the nationally known brands (Craftsman, DieHard, Kenmore); Penney (or Penneys, as it identified itself for a while) had its own brands but none with such visibility. JCPenney had catalogs, but Sears was better known for mail-order sales.

Still, JCPenney was a longtime major fixture on the American retailing scene, solid, stolid and reliable, an anchor first for downtown shopping districts, then for suburban shopping malls. The Sears-Penney duo likely anchored a majority of shopping malls in this country, providing the draw for customers.

JCPenney was fighting several debilitating trends before COVID-19 showed up. One is that the American department store is a retailing model with a long tradition in the past, dubious utility in the present and not much of a future. Your grandparents’ generation shopped at the big department store; your parents’ generation spent more time at the discount department store chains. Your generation, members of it anyway, hasn’t set foot in a traditional department store for years.

When the department stores are ailing, the malls they anchor are feeling queasy. The shopping mall has a bit more promising future in that someone might reconfigure them enough to keep people coming back. If they do, they’ll be visiting for entertainment, restaurants, events and other attractions, not the anchor stores. In the meantime, mall owners have a lot of vacant square footage not drawing customers and not generating revenue.

The big killer for the department store was online shopping. Traditional retailers have tried to make the move; JCPenney had a perfectly serviceable site. But a department store had big signs on big buildings, backed by millions of dollars in national advertising campaigns and those catalogs, to announce their presence. On the internet, though, Sears and JCPenney were just one among thousands of places to go, and the one place that everyone knew to go to wasn’t one of the traditional brands, it was Amazon.

Translating bricks-and-mortar success to the internet has been a challenge not just for old-line retailers but for the guys who were yesterday’s newcomers. Obscured by all the other news out there was the item that Walmart is shutting down its online shopping site Jet.com, a company it bought four years ago for $3.3 billion. Walmart has migrated much of Jet.com into its own online presence, and says the acquisition was “critical to accelerating our omni strategy,” the word “omni” apparently a synonym for “we’re not going to let Amazon eat our lunch the way we did to all those other retailers.”

As if the environment for JCPenney and its retailing cohorts wasn’t challenging enough, along comes COVID-19, forcing malls and stores to close and choking off whatever foot traffic there was. The company says the Chapter 11 filing will give it time to focus on its “transformation strategy.” That Penney was in dire need of such a strategy and that retailing is in mortal danger was not COVID-19’s fault. But if Penney doesn’t recover, COVID-19 can certainly be charged as an accomplice.

Mount Rainier train closes

In contrast to retailing, the travel and tourism industry was largely minding its own business and doing reasonably well until COVID-19 largely shut it down. The list of victims, in the form of businesses that don’t reopen, is likely to be long, and one of the first entrants is right in our backyard.

American Heritage Railways announced last week that it has closed the Mount Rainier Railroad excursion train, which operates on a segment of city-of-Tacoma-owned track under long-term lease.

The parent company, which also operates the famed Durango & Silverton narrow-gauge railroad in Colorado, said it is shutting down “for the foreseeable future, but it is also exploring “various ownership options with other entities” and is considering “the divestiture of its famed locomotives and other important infrastructure assets.” Mount Rainier’s collection includes several operating steam locomotives.

Rail attractions generally operate on thin finances and heavy contributions of hours from volunteers. Wiping out a season of ticket admissions, as COVID-19 threatens to do, is devastating. American Heritage, which bought Mount Rainier in 2016, outwardly appeared more professionally organized and with more resources than many smaller outfits. But there have been previous signs of financial strain. In 2019, when Colorado wildfire shut down the Durango operation, it also forced the closing of Mount Rainier Railroad, due to the loss of money to support it.

The longer the shutdowns run, the more precarious survival becomes for travel and tourism companies, whatever their size or sophistication (how’d you like to run a cruise-ship line about now?). What’s more powerful than a locomotive? We can think of one microbe that is.