J. C. Penney Reduces Workforce

J. C. Penney Company Inc. ( JCP - Analyst Report ) continues with its cost cutting efforts with the reduction of 350 jobs at its Plano, Texasheadquarters, marking the completion of the reorganization of its home office. The move was the part of the company’s much touted transformation plan, aimed to create a leaner and simplified operating structure.

To combat the competitive pressures from its peers like Kohl's Corporation ( KSS - Analyst Report ) and Macy's Inc ( M - Analyst Report ) , the company announced its plan to slash costs by $900 million in the first couple of years of its transformation, resulting in reduction of expenses below 30% of sales. Moreover, the company targets expenses to be 27% of sales in the long run.

Specifically speaking, management stated that it will abridge a significant amount of costs from stores and advertising as well as from operations at its home office.

The company took a string of strategic measures, including new pricing strategy, fresh logo, strategic merchandise initiatives, reduction in costs, enhancement of shopping experience and customers shopping at their own terms, to become America’s favorite store.

Despite these strategies, the company failed to live up to the expectation of its Chief Executive Officer, Ron Johnson.

J. C. Penney delivered sluggish first-quarter 2012 results with a sharp decline in revenue and profitability. The company posted a quarterly loss of 25 cents a share compared with earnings of 36 cents in the year-ago quarter, while its top-line plunged 20.1% to $3,152 million.

Adding to shareholders pain, J.C. Penney announced the suspension of the quarterly dividend to generate savings of $175 million annually in cash to be utilized for funding the transformation process.

However, this shouldn’t come as a complete surprise for the shareholders as J.C. Penney’s COO, Mike Kramer, previously announced that the company plans to self fund the entire transformation process.

(Read our full coverage on this earnings report: J. C. Penney Plunges, Dividend Shelved).

Currently, J. C. Penney retains a Zacks #5 Rank, which translates into a short-term “Strong Sell” rating.