The proposed purchase of J.C. Penney by mall operators Simon Property Group and Brookfield Property appears to potentially throw the bankrupt retailer a lifeline.

Can new owners succeed?
But can new owners – Simon and Brookfield signed non-binding letter of intent on Sept. 10 – right a 118-year-old retailing institution that has struggled for more than a decade amid multiple strategy changes and management teams?

It’s anybody’s guess how a new chapter will play out. There’s unconfirmed speculation that Authentic Brands Group, which partnered with Simon to buy Brooks Brothers and Lucky Brands, might become part of the consortium buying Penney, with plans to integrate its Forever 21, Aeropostale and other retail brands within Penney stores. ABG wouldn’t comment.

Penney’s recent history is one of failed turnaround attempts:

• Its downfall began in 2010 when activist investors Steve Roth and Bill Ackerman bought into a retailer whose sales had slumped to $17.8 billion in 2011 from $20.2 billion in 2007. Their radical solution was to hire former Target executive and Apple retail chief Ron Johnson as CEO. Johnson tried to rapidly change Penney’s budget-friendly image to a store housing a collection of boutiques and high-end designers. He also banished coupons and promotions –- a Penney staple — in favor of everyday low prices. The moves alienated existing customers while failing to attract enough new ones, erasing about $4.3 billion in sales in a single year and leading to Johnson’s ouster in 2013 after only 17 months.
• Johnson’s replacement, former Home Depot executive Marvin Ellison, sought to move the struggling business in another direction. In 2016, citing a void left by a weakened Sears, Penney relaunched major appliances, a category it had left 30 years earlier. Ellison left to become CEO at Lowe’s two years later.
• A third CEO, Jill Soltau, reversed Ellison’s course, quickly dropping appliances shortly after her hiring in late 2018 and moving furniture to online-only in seeking to return the company to its roots in “legacy” categories like apparel and soft home. The third comeback attempt, hampered by $5 billion in debt, wasn’t the charm, and J.C. Penney filed for bankruptcy in May.

Anchors
Penney’s continued survival as a traffic-driving mall anchor remains key for Simon, Brookfield and other operators at a time many malls have already lost one or two department stores. Lord & Taylor is liquidating, Nieman Marcus is in bankruptcy and Macy’s is closing locations. Mall stalwarts such as Gap and Victoria’s Secret also are cutting back. Mall operators also need to be concerned about co-tenancy clauses in lease agreements that call for reduced rent if key tenants leave.

Some have said that propping up and operating key retail tenants is outside the developers’ expertise. Simon CEO David Simon has acknowledged that “I do see the narrative that we are buying into these retailers to pay us rent, but those same people are the ones who told Amazon ‘stay just in the book business.’”

It’s a notable reference, considering that the large footprints that mall anchors occupy have been speculated as potential sites for… Amazon fulfillment centers.