J.C. Penney (OTC:JCPN.Q) faces a new coronavirus pandemic crisis as it prepares to open a handful of stores following the closure of all 850 locations in March.
Makeup giant Sephora has been issuing an escalating set of demands to the troubled department store chain before it opens its store-in-store boutiques, but also wants to end the relationship it has with the retailer.
Putting lipstick on a pig
J.C. Penney is suing the beauty supplies company to force it to open its boutiques when the retailer begins opening its stores. It offers curbside pickup at a few dozen locations, but Sephora says it's not opening any stores until at least May 22. After complaining about its employees being furloughed during the pandemic, Sephora said it wants J.C. Penney to use a special electrostatic spray to clean the counters before it does, according to a Bloomberg report.
The department store operator faces the risk of default on its loans as it may skip an interest payment on its debt, though it did pay its rent the month before. Sephora, which is owned by luxury conglomerate LVMH Moet Hennessy Louis Vuitton (OTC:LVMUY), is threatening to halt all shipments of beauty supplies to J.C. Penney if it doesn't cede to its demand to end their relationship by April 2021.
The department store chain's survival has often depended on Sephora's presence. The popular beauty supplies retailer's store-in-stores has generated foot traffic for the retailer that has spilled out into J.C. Penney's other departments, helping to lift sales.
Bankruptcy is now looming for the chain during the pandemic and the loss of Sephora could hasten its demise.