Understanding JCPenney’s Merchandise Mix



Revenue sources

JCPenney (JCP) sells merchandise and provides certain services to consumers through its department stores. The company also sells its products through its website at jcpenney.com. In this article, we will look at the key revenue sources for JCPenney.

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Women’s and men’s apparel

Women’s apparel is the dominant category of JCPenney’s merchandise mix. It accounted for 24% of the company’s net sales for fiscal 2014 ended January 31, 2015. JCPenney’s private brands account for two-thirds of its women’s apparel. Private brands help the company in meeting consumers’ value, style, and quality requirements. For instance, JCPenney’s Worthington brand targets modern career women, while the St. John’s Bay brand caters to traditional casual women. Part 5 of this series provides further information on the importance of private brands for JCPenney.

Both Nordstrom (JWN) and Kohl’s (KSS) derived 30% of their fiscal 2014 revenue from women’s apparel. This category accounted for 23% of Macy’s fiscal 2014 revenue. JCPenney, along with these three peers, accounts for 3.8% of the portfolio holdings of the SPDR S&P Retail ETF (XRT).

Men’s apparel and accessories contributed 22% of JCPenney’s fiscal 2014 revenue. John Tighe, senior vice president, or SVP, of men’s apparel at JCPenny, stated in the 2014 Analyst Day event, that the company ranks fourth in the industry, with a 4.4% market share. The company offers a wide assortment of national and private brands in products like shirts, suits, socks, and activewear. JCPenney’s private brands are designed based on varied customer choices. The Stafford brand offers traditional tailored clothing, while JF J. Ferrar is a lifestyle brand targeting the millennial consumer.

Other categories

Aside from women’s and men’s apparel, categories like footwear, jewelry, and home furnishings are equally important to JCPenney. In fiscal 2014, the home merchandise category accounted for 12% of net sales. Women’s accessories, including the company’s Sephora beauty business, accounted for 12% of net sales. Kid’s apparel, fine jewelry, and footwear accounted for 10%, 7%, and 8% of fiscal 2014 net sales, respectively. JCPenney derives 5% of its net sales by providing services such as styling salon, portrait photography, and custom decorating.

Overall, private brands form a vital part of the company’s net sales. However, the company lost its focus on this higher-margin business under a revamping attempt by former CEO Ron Johnson. The next part of this series discusses the company’s direction under Ron Johnson.


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