What JC Penney’s Bankruptcy And Plummeting U.S. Retail Sales Means For America

On the same day a government report showed a startling drop in U.S. retail purchases, one of America’s oldest department store chains filed for bankruptcy in another blow to the struggling retail market. But beyond the immediate market implications of the consumer report and the bankruptcy of Texas-based JC Penney, the one-two punch of economic news further wounded a U.S. economy reeling from the coronavirus pandemic.

Even more significantly, the news about JC Penney may have an impact on America for the months, and possibly years, to come.

JC Penney, founded in in 1913 by James Penney, grew from its early days as a one-stop-shop for rural farmers to a mainstay of suburban malls. As America’s middle class grew, so did JC Penney, riding trends that made department stores in vogue up until the mid-2000’s. But as American’s shopping tastes changed, JC Penney’s fortunes fell, and over the past several years it has struggled to maintain its market position. Since 2010, the department store giant has had a rotating cast of senior executives and store reinventions to try and turn its fortunes around, but it appears the coronavirus has finally forced the retailer’s clock to run out.

The department store chain is expected to reorganize in bankruptcy with $900 million in lender commitments to finance its restructuring. But it is the anticipated store closing and layoffs that will be its biggest news, with reports suggesting that it will permanently close over 150 of the chains nearly 860 stories, subjecting its roughly 90,000 employees with a potential wave of layoffs.

While JC Penney is joining other retailers like Neiman Marcus and Stage Stores in pandemic-hastened bankruptcies, its troubles poses a more unique impact on the America mindset. Unlike Neiman Marcus that has a reputation for high-end products and fine fashion, JC Penney gained a reputation as an affordable retailer that not only fills mall square footage, but has a big part of America’s collective shopping memory. JC Penney was a place for millions of Americans to do the back-to-school fashion shopping, home goods registries and holiday gift buying. Its catalog, much like that of its competitor Sears, was a model of aspirational consumerism for the average person.

Which is why the big retailer’s bankruptcy is one more blow to an already reeling nation. With a U.S. government report on Friday showing that retail sales plummeted 16.4% in April, exceeding the expected 12.3% decline, a quick retail recovery looks unlikely. Consumer expectations are also at a six-year low, with Americans increasingly expressing their unease with their economic prospects. These expectations may not be short-term either, with many consumers considering how their purchasing habits may be changed permanently as a result of the pandemic.

So how will all of this impact a nation headed into an unpredictable summer that includes a contentious presidential campaign?

It may be that images of shuttered department stores and even emptier malls could be what pushes more Americans, especially in the suburbs, to question not only the direction of the economy, but also the country. Seeing the big retailers of their past go bankrupt could be one more emotional twist to an already heart-wrenching pandemic. And most of all, it could prompt many Americans to wonder whether their economy, or even their way of life, will ever be great again. Those questions will not only impact how Americans spend money, but also how they vote in November.

Sometimes a bankruptcy is just a bankruptcy. But in the case of J.C. Penney, one of America’s last major departments stores, even the most optimistic among us need to question whether its bankruptcy is a bellwether of things to come, not only for American retailers, but for America’s future as well.