Pressure on top line
Sales at JCPenney (JCP) and other department stores have been under pressure due to severe competition from online retailers like Amazon (AMZN) and discount or off-price retailers like TJX Companies (TJX). In fiscal 3Q16, which ended on October 29, 2016, JCPenney’ sales fell 1.4% due to weak apparel sales. Sales of Macy’s (M) and Kohl’s (KSS) fell 4.2% and 2.3%, respectively, in fiscal 3Q16. In this article, we’ll focus on the measures JCPenney is undertaking to boost its top line.
Focus on beauty business
JCPenney is looking for growth beyond apparel and focusing on categories like beauty and home. As mentioned in JCPenney’s August 2016 Analyst Day presentation, the beauty industry is forecasted to grow at a CAGR (compound annual growth rate) of 4% to 5% through 2020.
JCPenney’s Sephora beauty business is one of its key growth drivers. Sephora is owned by the luxury group LVMH Moet Hennessy Louis Vuitton SE (LVMUY)(MC.PA). The Sephora stores within JCPenney locations offer an extensive range of beauty products and help the company attract Millennials, a key demographic. JCPenney opened four new Sephora locations in fiscal 3Q16 and a total 60 in the first nine months of fiscal 2016. The company ended fiscal 3Q16 with 578 Sephora locations.
Aside from Sephora stores, JCPenney is also strengthening its beauty business through its fine jewelry and salon businesses. In its fiscal 3Q16 conference call, JCPenney’s chief executive officer, Marvin Ellison, mentioned that the company has 800 salon locations in America, making it the largest salon business under one brand in the country.
Growth in home business
In early 2016, JCPenney reintroduced home appliances in some of its stores after a gap of over three decades. The company has now expanded its appliance business to 500 locations and jcp.com. In the fiscal 3Q16 conference call, JCPenney’s CEO mentioned that the appliance business contributed more than 200 basis points to the company’s October same-store sales.
JCPenney’s other initiatives in the home business include the introduction of Empire Today flooring in 18 stores and the addition of Signature Design by Ashley to the furniture merchandise.
Aside from the beauty and home businesses, JCPenney is trying to attract more consumers to its stores by offering specially sized clothing.
We’ll discuss JCPenney’s online business in the next part of this series.