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How Sephora Brought Beauty to JCPenney’s Stores

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Sephora store-within-a-store

In the previous part of this series, we mentioned JCPenney’s (JCP) Sephora store-within-a-store business as a key part of its center core strategy. JCPenney partnered with Sephora in 2006 to open Sephora beauty stores within JCPenney stores. Sephora is owned by the luxury group LVMH Moët Hennessy Louis Vuitton SE (LVMUY) (MC.PA). Sephora stores-within-a-store offer beauty products from over 200 beauty brands

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Aggressive expansion

The proportion of net sales contributed by the women’s accessories category, which includes the Sephora partnership, increased to 12% in fiscal 2014 ended January 31, 2015. The category accounted for 11% and 10% of net sales in fiscal 2013 and fiscal 2012, respectively. The Sephora store-within-a-store concept has helped increase store traffic in JCPenney’s stores. They also provide differentiation to JCPenney stores compared to rival department stores.

The Sephora store-within-a-store business has been registering double-digit comparable sales growth. The company is also expanding its Sephora store business in new and smaller markets. JCPenney currently has Sephora store-within-a-store in over half of its stores. In fiscal 2012, 2013, and 2014, JCPenney opened 78, 60, and 46 Sephora stores-within-a-store, respectively. The company continues to expand its Sephora business with 25 stores planned in fiscal 2015. The company is also expanding the size of some of its Sephora stores that were opened earlier. Sephora products are also available on JCPenney’s website.

Beauty business: A growth category

Aside from JCPenney, peers Kohl’s (KSS) and Macy’s (M) have also been expanding their beauty business. Kohl’s revamped its beauty business and has new beauty departments in 900 stores. Macy’s has been aggressively expanding its Bluemercury business, which it acquired in March 2015. JCPenney, Kohl’s, and Macy’s account for 2.8% of the SPDR S&P Retail ETF (XRT). Macy’s and Kohl’s together constitute 0.2% of the SPDR S&P 500 ETF (SPY).

Aside from expanding its Sephora beauty business, JCPenney also worked on reorganizing its home department.

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