Importance of online channels
Department stores like JCPenney (JCP), Macy’s (M), and Nordstrom (JWN) are aggressively enhancing their e-commerce infrastructure as more and more consumers are looking for the ease of shopping online. Also, through their online initiatives, department stores are attempting to fight intense competition from Amazon (AMZN).
With a score of 140, JCPenney ranks fourth in the 2016 Digital IQ Index for Department Stores compiled by benchmarking firm L2. Nordstrom is at the top of the Digital IQ Index with a score of 152. Macy’s (M) brands Macy’s and Bloomingdale’s rank second and sixth in L2’s digital IQ Index. Kohl’s (KSS) ranks third with a score of 143.
JCPenney constitutes 0.4% of the iShares S&P Mid-Cap 400 Value ETF (IJJ) and 0.2% of the iShares Core S&P Mid-Cap ETF.
JCPenney has been expanding its online merchandise assortment to attract more consumers. In the fiscal 3Q16[1. Fiscal 3Q16 ended on October 29, 2016] conference call, the company’s chief executive officer, Marvin R. Ellison, mentioned that the company’s online SKUs (stock keeping units) have risen over 40% year-over-year. The expanded merchandise assortment includes home appliances and Ashley’s furniture.
JCPenney completed the chain-wide rollout of its buy-online-pick-up-in-store facility in fiscal 2Q16. In the fiscal 3Q16 conference call, JCPenney’s CEO stated that about 40% of its online orders were picked up in a store in the third quarter. This shift helps drive higher store traffic and might result in additional purchases. The company’s online sales are also enhanced by its recently launched mobile app.
We’ll discuss JCPenney’s margins in the next part of this series.