J.C. Penney to Expand Wauwatosa, Wis., Distribution Center.

Byline: Tom Daykin

Aug. 2--J.C. Penney Co.'s catalog distribution center in Wauwatosa, which had been scheduled to close, will instead expand into a distribution center serving the company's Midwest department stores.

Those plans, disclosed Thursday, will allow 200 workers to keep their jobs and an additional 675 to be hired. The massive distribution center, which three years ago employed 1,500 people, is at 11800 W. Burleigh St., just west of Highway 45.

In return for creating the jobs, J.C. Penney will receive $300,000 in grants from Wauwatosa officials to help improve the facility, said Nancy Welch, Wauwatosa community development director. Those community development block grants are provided to the city by the federal government.

City officials will seek an additional $200,000 in federal grants that are doled out to the states for road improvements, Welch said.

The city will use that money to install a traffic light near the distribution center, at N. 124th St. and W. Feerick St., and to widen Feerick St. to better accommodate trucks entering and leaving the facility, she said.

The city's $500,000 of financial assistance is a good investment in return for 875 jobs retained and created, Welch said.

The other option, attempting to redevelop a vacant 2 million-square-foot distribution center, would have been much more difficult, she said.

That could have required demolishing the facility, much of it nearly 40 years old, in order to make the 74-acre site available for development, Welch said. Demolition alone would have cost roughly $3 million, she said.

City officials agreed to provide the financial assistance to J.C. Penney after the company said the Wauwatosa facility was one of three potential choices for a new store distribution center, Welch said.

J.C. Penney is opening 13 distribution centers throughout the nation that will help ship clothing, housewares and other items from J.C. Penney's vendors to the chain's 1,074 department stores, said company spokesman Tim Lyons.

The distribution centers are replacing the current system of having vendors ship goods directly to the department stores, Lyons said. That system is too cumbersome, and the new distribution centers are designed to help J.C. Penney reduce its costs.

"We had to make it more efficient and bring it in line with what our competition has been doing," Lyons said.

Retailers such as Wal-Mart Stores Inc. and Kohl's Corp. have been able to undercut J.C. Penney and other traditional department store chains in part by operating highly efficient distribution systems.

J.C. Penney, based in Plano, Texas, has struggled for years but has lately made progress with its turn-around effort. The company in May reported first-quarter earnings of $86 million, or 29 cents a share, up from $41 million, or 13 cents, during the same period in 2001. Analysts had predicted first-quarter earnings of 25 cents a share.

The Wauwatosa center is scheduled to complete the conversion by November, Lyons said. The center will serve 107 department stores in Wisconsin and surrounding states, he said.

The center's employment of 875 people could increase to around 1,000 employees during peak holiday season periods, Lyons said. Most of the new employees will be hired by November, he said.

J.C. Penney acquired the Burleigh St. facility through its 1962 acquisition of Milwaukee-based General Merchandise Co., which was then one of the nation's largest mail order retailers.

J.C. Penney entered the catalog business through its purchase of General Merchandise. The company greatly expanded the Burleigh St. distribution center as part of its push into the mail order segment.

The facility, one of six J.C. Penney catalog distribution centers throughout the country, had 1,500 employees as late as November 1999. That's when J.C. Penney announced it would lay off 500 workers at the facility because of slumping catalog sales.

The company also converted a portion of the facility into a distribution center to serve other catalog and Internet-based retailers, including Web sites operated by the Ann Taylor women's clothing retail chain and gardening retailer Smith & Hawken.

By June 2000, the facility was down to 800 employees. And by March 2002, that number had dwindled to 334 employees, with the dot-com retailing bust and the company's continued catalog slump taking its toll on the operation.

J.C. Penney in March announced it would close the facility by January 2003, eliminating the remaining jobs. The company was downsizing its catalog operation, and no longer needed the center.

The announcement that hundreds of jobs will instead be returning to the facility is "great news," Welch said.

J.C. Penney has said the jobs' wages will be "family supporting," Welch said, but the company has not yet provided specific wage data to city officials.

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(c) 2002, Milwaukee Journal Sentinel. Distributed by Knight Ridder/Tribune Business News.

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