Many iconic American businesses have gone into decline over the course of the last decade or so and one of those is departmental store chain, J.C. Penney Company Inc (OTCMKTS:JCPNQ). Earlier this year, the company filed for bankruptcy due to its mountain of debt. However, on Monday, the J.C. Penney stock got a fresh lifeline after it emerged that e-commerce giant Amazon might be on the verge of renting its stores and also those of Sears as fulfillment centers.
Amazon May Take Over Old J C Penneys
It has emerged that Amazon is currently in talks with the biggest mall owners in the United States, Simon Property Group, with regards to these rentals. The news resulted in a rally in the J.C. Penney stock as well and it rallied by as much as 20% on Monday.
In these circumstances, it might not be a bad idea for investors to take a closer look at the company and then consider their moves. One thing that is common between J.C. Penney and Sears is the fact that both these well known retail chains filed for bankruptcy. Hence, most of their stores are closed.
On the other hand, the move from Amazon is a strategic one. Renting these stores as fulfillment centers will allow the company to be nearby residential areas and hence, boost its last-mile delivery capabilities. Over the years, Amazon has improved its capabilities in this regard incrementally and it has been one of the factors behind its success.
It could also come as a major boost to the company’s one-day delivery option. On the other hand, mall owners like Simon Property Group need tenants who can replace the rents they have lost owing to their bankrupt clients. Although it can be argued that having Amazon as a client is not going to solve the footfall issue, it will prove Simon Property Group with a steady client who will continue to pay the rent long term. A former executive at retail chain Target stated that it is a mutually beneficial deal for both entities since Simon Property gets an ‘anchor tenant’ and on the other hand, Amazon gets to have its fulfillment centers near residential areas.
The coronavirus pandemic had come as a big boost to Amazon as more and more people had no other option but to buy things online. Many believe that it has permanently made a change in many people’s preferences with regard to shopping modes.
Hence, the e-commerce giant is now looking to ensure that it has the capabilities to manage last-mile delivery. Considering the fact that Simon Property Group is one of the joint bidders for J.C. Penny after the latter filed for bankruptcy, it is only natural that the departmental store’s stock has got a boost.
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