Posts Tagged 'JCPenney'

Sears opens appliance/mattress stores

RetailWire panelists discussed Sears’ plans to open stores specializing in nothing but major appliances and mattresses. While this may have been a solid strategy 20 years ago, count me as a skeptic given Sears’ issues today:

It’s hard to picture anything solving the Sears problem at this point. The company just announced the closure of a mall anchor here in Milwaukee (after closing another anchor over a year ago), leaving it with just one full-line store here. I’m sure the story is being duplicated around the country, at the same time that Sears has been closing (not opening) appliance-only franchise stores.

Sears’ legitimate franchise in appliances is evaporating as it continues to shrink its footprint and sell off its key brand (like Kenmore). The appliance space is crowded with competitors, now including major investments by Amazon and JCPenney. And who needs another place to buy mattresses, especially given the growth of online sales?

JCP pursues B2B opportunities

Here’s a new RetailWire comment on Penney’s announcement that it is going after B2B opportunities with hotel operators, property developers, etc. to place its home goods in these kinds of facilities. It’s another example of CEO Marvin Ellison taking a page from his Home Depot playbook:

I’d be less concerned about the borrowings from Home Depot if I didn’t see improvements on the softlines side happening at the same time. There’s evidence (at least to these eyes) that the new merchant team at JCP is making some headway especially in women’s apparel, where the assortments and brand identity look crisper than they have for awhile.

That being said, the B2B initiative is a puzzle to me. Penney may see it as a volume opportunity — and a branding opportunity to place its private-label home goods inside hotel rooms, etc. But will hotel operators and franchisees be interested in dealing with a middleman, if they already source their linens and towels through the buying power of brands like Hilton, Marriott, etc.?

Who gains when HHGregg loses?

Among several other stores closings announced in 2017, the regional electronics and appliance chain HHGregg may have flown under the radar. It did come to the attention of RetailWire panelists like me:

Best Buy will benefit, naturally, in those markets where HHGregg had a store footprint and market share. There are significant clusters of stores around Chicago, in the mid-Atlantic and mid-South (including Atlanta) and in Florida. But don’t expect it to compare to the demise of Circuit City — not only because HHGregg isn’t a national competitor but also because of the changing retail landscape.

Another retailer that might gain share is JCPenney, as it pushes into the major appliance business. Keep an eye on the big home improvement chains, too; this is one business that hasn’t been dominated by Amazon (yet).

JCP: Too early to declare victory

JCP’s CEO recently declared that its (slight) 2016 profit repreesented an historic turnaround. Most RetailWire panelists agreed with my contrary view:

It’s admirable that JCP has stopped bleeding cash but its net earnings in 2016 were just over $1 million (not the EBITDA number, which was higher). So it’s premature to declare an historic victory in light of store closings and soft sales. The slippage in gross margin in 2016 is another area of concern, because competition won’t be any easier in 2017.

With those reservations in mind, Mr. Ellison has had his eye on the ball ever since assuming the CEO chair and continues to focus on the right things — data science, expense controls, driving sales opportunities and weeding out unproductive locations.

Can JCP keep expanding Sephora?

Penney has been aggressive about expanding Sephora shops to its full- and mid-sized stores, even while rebounding from its missteps in 2012-2013. The question posed on RetailWire is whether JCP should expand the concept to its small-town, small-footprint locations. Here’s my take:

I regularly shop a midsized JCP store in Menomonee Falls, Wisconsin. (The home of Kohl’s headquarters…not coincidentally.) Penney built this and other roughly 90,000 square foot locations before the Ron Johnson era, to see if it could operate Kohl’s-sized off-mall stores successfully. This location does contain a Sephora shop, although not as big as the one just installed at a local anchor store in a Simon mall.

I think it’s essential that Penney and Sephora develop a more “curated” version of their collaboration for the many even smaller JCP stores around the country. It’s arguably the most successful part of Penney’s business for the past several years; in many of the smaller communities where these stores are located, Sephora will be the only game in town for shoppers who want more than their local discounter can offer.

JCPenney: “Less bad than most” again

JCP reported 2nd quarter results that were modestly better than other department stores’ sales trends, and measurably better in operating profit compared to their own past standards. This continues to point toward operating improvements but it’s a long way from a true turnaround until the sales trend becomes more robust. Here are some thoughts I posted on a recent RetailWire panel discussion:

Marvin Ellison has noted the sales gains in JCP locations where Sears has closed, and it’s not surprising. Even those Sears stores that are still open are often woefully light on basic inventory, especially in Penney’s sweet spots like sheets, towels, socks and underwear. And the play for Sears’ appliance business is clearcut, even though JCP also has an opportunity to make its own home stores more productive.

But some of the credit for JCP’s modest operating improvements is coming from other initiatives that Mr. Ellison is spearheading — cost reductions, improved supply chain management, better IT managment, and (most important) new merchandising leadership. Given these changes, and the tailwinds coming from Sears and Macy’s store closures, JCP investors probably have a right to expect faster growth after 2016.

Has overpromotion hit a wall?

The topic of whether department stores (and other retailers) are overpromoting is always a provocative one at RetailWire. Here are my recent thoughts on the subject:

JCPenney makes a good cautionary tale about what happens when a promotional department store tries to go “cold turkey” on its sale events. LIke it or not, the customer has been trained to wait for sales for a long time (Gimbels, anyone?) but the difference now seems to be the frequency of margin-busting sale events and extra discounts. JCP’s experience may have scared other retailers away from cleaning up their promotional calendars and risking a volume meltdown.

Certainly retailers like Amazon and Costco drive plenty of volume without being especially promotional. But they operate with different margin requirements (and expense structures) than the typical department or specialty store. So I’m not sure there is an easy answer to the question — but it’s clear that the overpromotion is not driving sales growth.