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How JCPenney’s Merchandising Strategy Is Boosting Its Sales

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Apr. 26 2016, Updated 6:06 p.m. ET

Strong sales growth

JCPenney’s (JCP) merchandise assortment has helped in enhancing its sales. In fiscal 2015 ended January 31, 2016, JCPenney’s sales grew by 3%. The company outperformed peers Macy’s (M) and Dillard’s (DDS), which reported declines of 3.7% and 0.4%, respectively, in their fiscal 2015 sales.

JCPenney also generated a higher sales growth than Kohl’s (KSS), which reported an ~1% rise in its fiscal 2015 sales. Nordstrom (JWN) reported a 6.9% sales growth in fiscal 2015, mainly due to its off-price business and online sales.

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Merchandising strategy

JCPenney’s merchandising strategy includes a focus on private brands, upgrading each store’s center core, and expanding the company’s Sephora beauty offerings. We’ll discuss the company’s private brands in the next part of this series.

The company believes that these initiatives could help in increasing revenue per customer by growing shopping frequency and boosting the amount the customers spend on every transaction.

Center core

JCPenney (JCP) is upgrading each store’s center core area, which includes fashion and fine jewelry, handbags, footwear, sunglasses, and accessories. JCPenney believes that its focus on center core products will increase cross-selling opportunities in other departments.

In 2015, the company expanded its assortment of women’s shoes. The company also separated the women’s and men’s footwear sections by relocating men’s shoes to the men’s department. JCPenney also launched and enhanced its assortment of handbags, including a strong focus on the Liz Claiborne brand.

In the 4Q15 conference call, Marvin R. Ellison, JCPenney’s chief executive officer, stated the company plans to redesign the center core shopping area of over one-third of its stores in the first half of 2016. The iShares S&P Mid-Cap 400 Value ETF (IJJ) has 0.4% exposure to JCPenney.

Sephora

Sephora has been a key growth driver for JCPenney’s sales growth. JCPenney partnered with Sephora in 2006 to open Sephora beauty stores within the company’s 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.

In 2015, JCPenney opened 28 new Sephora stores-within-store, bringing the total number of Sephora locations inside JCPenney to 518 stores. The company also introduced a selection of Sephora makeup, skincare, and fragrance products to its website in 2015. JCPenney plans to open 60 new Sephora locations in 2016.

Read on to learn how JCPenney’s private brands are helping its growth.

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