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Can JCPenney Get Its Sales Back on Track?

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Tough retail market

JCPenney (JCP) has been implementing several initiatives to improve its sales growth. After delivering sales growth for five straight quarters, JCPenney’s sales declined by 1.6% in fiscal 1Q16, which ended April 30, 2016, amid tough retail conditions. 1Q16 same-store sales fell 0.4%.

The decline in 1Q16 sales was due to unseasonable weather and changes in consumer spending patterns. The first quarter was also challenging for peers Macy’s (M), Kohl’s (KSS), and Dillard’s (DDS), which reported declines of 7.4%, 3.7%, and 4.6%, respectively, in their 1Q16 sales.

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Sales growth initiatives

Despite the decline in 1Q16 sales, JCPenney maintained its fiscal 2016 same-store sales guidance in the 3%-to-4% range, citing the positive nature of its recent sales trends, the strength of its Sephora beauty business, and the company’s decision to accelerate its appliance rollout.

The partnership with Sephora, which began in 2006, has been a key growth driver for JCPenney’s sales. Sephora is owned by the luxury group LVMH Moët Hennessy Louis Vuitton SE (LVMUY)(MC.PA). JCPenney considers Sephora stores-within-stores to be a key differentiation point. In fiscal 2015, the company opened 28 new Sephora locations, ending the year with 518 Sephora locations inside JCPenney stores. The company plans to open 60 new Sephora locations in fiscal 2016, of which 28 locations opened at the end of April.

To increase its store traffic, the company is redesigning the center core shopping area of over one-third of its stores. The center core area includes fashion jewelry, handbags, sunglasses, and fashion accessories. The iShares S&P Mid-Cap 400 Value ETF (IJJ) has 0.4% exposure to JCPenney.

Focus on home business

To provide greater diversification to its business, JCPenney brought back appliances to its stores after over three decades in February 2016. In May 2016, the company announced that it will be adding appliance showrooms in nearly 500 of its stores. JCPenney plans to introduce major appliances to new stores starting early July through the fall. JCPenney will be offering leading kitchen and laundry appliances from Samsung (SSNLF), LG, GE (GE) Appliances, and Hotpoint. The company is also offering an extensive range of appliances on its online channel, jcp.com. In May 2016, the company announced its plans to increase its offerings in window coverings and test new products and services provided by Ashley Furniture and Empire Today carpets and flooring.

Read on to learn more about the company’s efforts to improve its digital business.

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