Image: J.C.Penney
J.C. Penney is feeling merry about its Christmas performance
J.C. Penney is on a mini same-store sales gain roll. The department store retailer built on a 1.7 increase in third-quarter comparable store sales with a 3.4 percent year-over-year gain during the last two months of the year.
The performance left Penney chairman and CEO Marvin Ellison in a merry mood.
“We are very encouraged with our overall comp sales performance during the holiday season, which was led by home, beauty and fine jewelry. Additionally, our apparel categories continue to demonstrate improved comp performance, particularly in women’s and kids,” said Mr. Ellison in a statement.
Penney’s holiday performance was also buoyed by its e-commerce business, which continues to grow at a double-digit clip. Mr. Ellison pointed to gifting categories including “fine jewelry, home decor and luggage, toys, boots and athletic footwear” as key sales contributors.
“Our ability to execute e-commerce fulfillment from 100 percent of our brick and mortar stores helped fuel the growth in e-commerce for the holiday season,” he said. “We remain confident that our strategic initiatives are taking hold and resonating with customers.” In an interview with Fortune, Mr. Ellison said Penney’s online inventory was 70 percent higher this holiday season than in 2016.
As he has done in the past, Mr. Ellison pushed Penney’s intent to target customers being lost by Sears, particularly in major appliances, as key to his company’s continuing turnaround. Sears Holdings, parent company of its namesake banner, announced yesterday that it plans to close an additional 39 Sears and 64 Kmart locations on top of those it had previously made public.
Sears has emphasized online sales, including sales of Kenmore appliances on Amazon.com. In July, the companies announced a deal by which Amazon would own and sell Kenmore appliance inventory and Sears would handle shipping to customers.
In an interview with Fortune, Mr. Ellison said, “We’re going after Sears and we’re going after market share that we think is going to be available not only now but as they continue to contract.”
- JCPenney Provides Holiday Sales Performance Update – J.C. Penney Company, Inc.
- J.C. Penney CEO Warns Sears: We’re Coming for Your Appliance Business – Fortune
- Did Amazon just send Sears a life line with their Kenmore deal? – RetailWire
- Will being more like Home Depot work for J.C. Penney? – RetailWire
- Can toys raise J.C. Penney’s game? – RetailWire
- Has J.C. Penney figured out a fix for its fashion problem – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: What do you think J.C. Penney’s holiday sales performance says about the retailer’s prospects going forward? What parts of Penney’s business give you the greatest hope and concerns for its business?
Poll
BrainTrust
Jennifer McDermott
Consumer Advocate, finder.com
Roy White
Editor-at-large, RetailWire
Lots of retailers had a good holiday season, so it’s difficult to say how much of J.C. Penney’s performance was simply good market conditions. That said, we do need to give management some credit for the results. However, notwithstanding the holiday season, many of the challenges faced by departments stores remain — tired stores, incoherent product assortments and too many locations. Stealing share from failing competitors likes Sears is a short-term strategy.
Agreed Mark, holiday success appears felt across the board. I wonder also how these results will be impacted by the predictions of goods returns which are expected to be worth billions.
Hopefully for J.C Penney and also within the industry, this growth can continue well into 2018.
There is no doubt that J. C. Penney has made many changes to its business and those changes are proving to be successful. They are concentrating on creating an in-store atmosphere that is appealing to a department store customer. J. C. Penney’s store-within-a-store concept and bringing back traditional department store categories like appliances has positioned them aside from their competitors. If they continue to focus on what attracts their customers, provide a great selection and give customers a reason to shop their stores, J. C. Penney will continue to succeed and leave their competitors behind.
J.C. Penney had a good holiday season in terms of comp store sales. Let’s not forget how they got there — by closing 140 stores.
I think it is a good effort, but what I don’t see is a strategy. Just saying that they are going to target Sears customers is not a strategy. I think it is a mistake to get into the appliance business and that is reflected in the 70 percent increase in year-over-year inventory.
I would like to see a strategy for J.C. Penney that is more than just recreating Sears. Because we are seeing how that is playing out.
Their strategy of not so much “going after Sears” but finding new and creative ways to scoop up Sears’ customers will be critical for their success in 2018. But I’m not sure that the aggressive language from Ellison does much except for maybe portraying the company as stronger than it really is.
Still, although J.C. Penney did better than them, Kohl’s and Macy’s closed the season in a merry mood as well. If J.C. Penney can weather the market downturn in Q1, they may be able to pick up customers not just from Sears but from a few other sinking chains as well.
The strong economy did have a positive impact on J. C. Penney. However, these results are no guarantees that the future will be positive for J.C. Penney. As noted, Sears, “where America used to shop,” continues its drumbeat of store closures. At the same time, Macy’s announced the closure of seven more stores and 5,000 job cuts. These middle-of-the-road retailers, including J.C. Penney, will continue to face survival challenges — let alone growth challenges.
That being said, J. C. Penney’s continued targeting of Sears makes sense. In addition, its strong performance in home, beauty, fine jewelry and apparel may give J.C. Penney permission to pursue Macy’s as well. Going forward, the focus should be twofold: 1.) Continued enhancement of the in-store experience and 2.) Continued investment in online. J.C. Penney should not let its holiday success lead to complacency.
The macro retail economy and overall economic momentum have been excellent throughout the fourth quarter. It’s challenging to attribute what led to J.C. Penney’s positive holiday sales performance. While J.C. Penney has made significant strides in their evolution to a digital/omnichannel model, there are plenty of challenges ahead for them, along with the remainder of the department store segments.
One positive quarter is encouraging, however the department store segments should continue their focus on revitalizing their storefronts, closing non-performing stores, curating assortments and providing a compelling reason for the digital-first shoppers to come back to the department stores.
Let’s hope these seasonal successes are a predictor of the future. I would be concerned if this were a negative result since most retailers showed positive gains over the holidays. Before we jump on the bandwagon we should wait to see what the first quarter report tells us.
Strong consumer expenditure is the rising tide that has floated all boats during this holiday season. As such, the better performances from J.C. Penney and Macy’s do not necessarily signal good times ahead.
That said, J.C. Penney has grown sales across many of the categories, like home, where it has made investments and improvements. That’s an encouraging sign that shows the optimized offers have potential. However, apparel remains a problem area and one that J.C. Penney needs to remedy if it wants to deliver a sustained recovery.
Past performance is no guarantee of future results, but I am encouraged that J.C. Penney continues to try new ideas in their stores. More focus on services, white ware and shops shows that they are trying to create a better shopping experience.
“Going after Sears,” now isn’t that special? In retail you can play a lot of games with the numbers. I think J.C. Penney is on death watch despite what the press says. The closing of several more Sears stores won’t do J.C. Penney much good. J.C. Penney is only a slightly better-run rummage sale than Sears.
It’s a positive story. My cautionary note is that while the comp is up based on Sears’s loss, we should ask; is J.C. Penney as a business executing better than they were a year ago? There is a lot of talk about comp being up, but how is the conversion rate? If this is up as well then happy days, but if this is not then the success is purely based on Sears’s demise and something J.C. Penney can take less credit for. Conversion rate is a key metric any retailer should be 100 percent focused on, I would always argue.
J.C. Penney should certainly be as merry as they want with these numbers, but they should by no means get carried away. The basic dynamics the retailer faces have perhaps been alleviated during a remarkably good Christmas season for many merchants, but in fact the issues remain. For example, through the nine months ended October, corporate sales were down, the net loss after taxes widened to $370 million from $191 million, debt continues to be over $4 billion, 139 stores had to be closed during the period, and no new units were opened. J.C. Penney has a ways to go yet.
In Holiday ’16, retail was up 4% and JCP SSS was -0.8%. (Q4’15 +4%, H’14 +3.7%) In Holiday ’17, retail was up 4.9% and JCP SSS was 3.4%. From 2008 to 2014, JCP lost $8B in revenue. Comparably no other peer experienced such a radical top-line adjustment. JCP has about 870 US stores from over 1,200. As a mall based, moderately priced department store, JCP has too many stores in bad locations and overall too many selling sq ft.
Holiday ’17 was a high tide driven by buoyant shopper enthusiasm in urban/suburban areas. Not the case outside of those areas. And JCP did not keep pace with the industry. A two-year stack is worrisome.
JCP is affected by all the negative external trends facing mid-tier US retail, and internal weaknesses in its own facilities. Further, JCP has not had assets on hand to invest in necessary technologies to bring the brand experience up to current shopper expectations.
The home business is encouraging after years of effort. Apparel disappoints which is problematic. The pivot to appliances is a challenge of focus as well as relevance.
JCP’s only chance is to close 50% of its stores and shrink its floor plan that takes burdens operating profit. Shopper demand does not match store size. And JCP has to solve for an irrelevant shopping experience which interferes with brand appeal among new family formers. In its current precarious financial straits, the necessary technological upgrades will be difficult to fund.
I just don’t see a reason for a 850 store chain of 200K sq ft stores, atop Sears, Macy’s and the remaining regional brands (Dillard, BonTon, Belk, VonMaur, etc.).
Smart, smart, smart. Penney’s is doing the right thing (finally) as they go after disenchanted Sears customers, while building up their online presence. How they continue this growth in the future, and the partners they associate with in their growth (Amazon?) will determine their growth in 2018 and beyond. Mr. Ellison needs to continue to stick to Penney’s core strengths of jewelry, beauty and home goods as they push growth further.
While I’m glad to see JCP drove some top-line growth this past holiday season, I’ll hold back my ebullience until it releases some profit reporting. Here’s why: During two store visits last month I noted brisk traffic, but also some very deep discounting going on. Men’s suit separates at 60% off, for example, and BOGOs on shirts, ties, and belts.
The past season proved again that a rising tide lifts all boats. It remains to be seen how leaky the JCP fleet is.
While these gains are in line with what could be called optimistic/realistic expectations, it should be remembered that only gets them off the “life-support” list … and onto the “chronically ill” list. They still have to deal with the online challenges, fast fashion challenges and income shift challenges. For many years the country has had three national (department store) retailers, it will likely soon have only two, and might find out that there’s only room for one … if so, which one, Macy’s or JCP, will it be?
It’s difficult at this point to quantify how much of J.C. Penney’s holiday season success is from their own strategy vs overall strong performance for the entire industry. It is a positive sign and it will be interesting to see how their Q1 performance plays out and if they successfully retain those customers for repeat visits.
That said, claiming they will chase after Sears customers is a short term strategy, not a long term vision. What we need to hear from Ellison is more about how they are improving their assortments, for example. While we heart positive news about appliances from him, what about apparel and their home departments? We’re used to hearing how their Sephora store-in-a-store is helping them, but where do we see the data that shows us those customers are converting into JCP customers at the same time? And lastly, while we hear from so many other retailers about their investment in new technology to build better in-store experience, what is Ellison’s plan in this area to help them stay ahead of other dept store brands?
It’s always nice to comp against lousy numbers isn’t it? Just as it’s nice to be in a category being abdicated by a giant like Sears. Not to mention a strong stock market.
We’ll see lots of positive comps for holiday, but the real proof and truth of the great retail turnaround is profitability. We’ve already seen examples where smart retailers are reducing their promotion and trading topline growth for bottom line improvement.
J.C. Penney’s recent changes have proved to be the most effective way to boost holidays sales this year. This data brings key insights not only for J.C. Penney but for many other retailers, too. In general, when in doubt about certain business models or practices, retailers should always try to re-think their business concepts as much as possible. Sometimes changes are inevitable, and their outcomes tend to be positive in most cases.