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Why JCPenney Is Pulling Appliances from Its Stores

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Feb. 7 2019, Published 8:04 a.m. ET

JCPenney to stop selling appliances

JCPenney (JCP) will stop selling major appliances at its stores starting at the end of February. The mid-tier department store chain will also reduce its exposure to furniture and will offer the category only on its website and at select stores in Puerto Rico.

JCPenney originally started offering appliances, furniture, and toys in its stores to capture growth opportunities beyond the struggling apparel category. However, under the leadership of its new CEO, Jill Soltau, JCPenney has decided to stop selling lower-margin products such as home appliances. The company intends to optimize its store space by focusing on higher-margin merchandise categories such as apparel and soft home furnishings.

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Disappointing sales trend

After reporting bleak same-store sales growth of 0.2% and 0.3% in the first and second quarters of fiscal 2018, respectively, JCPenney further disappointed investors with a 5.4% fall in its same-store sales in the third quarter of fiscal 2018 (which ended on November 3, 2018).

In January, the company announced a 3.5% fall in its same-store sales on a shifted basis over the holiday period (the nine-week period that ended on January 5, 2019). On an unshifted basis, the company’s same-store sales fell 5.4%. The holiday season is the most crucial sales period for retailers and is a key contributor to a retailer’s annual sales. However, JCPenney failed to impress in the holiday season and lagged its department store peers Macy’s (M) and Kohl’s (KSS). Macy’s holiday same-store sales rose 0.7% on an owned basis and 1.1% on an owned plus licensed basis. Kohl’s holiday same-store sales increased 1.2%.

JCPenney has been trying to improve its apparel sales through several initiatives, including offering plus-size clothing and activewear. However, intense rivalry from online and off-price retailers is working against the company’s growth prospects.

As of February 6, JCPenney stock had risen 26.9% since the start of 2019. The stock fell 67.1% in 2018. As of February 6, Macy’s stock was down 14.8% on a year-to-date basis, while Kohl’s was up 0.7%.

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