A Contrarian Penney to Sell Outlet Stores
While many other retailers are increasing the number of outlet stores they operate, J.C. Penney is getting out of the business altogether.
According to a Bloomberg News report, Penney has reached a deal to sell its outlet stores to SB Capital. The department store chain made the decision to get out of operating the 19 stores at the same time it is closing its print catalog business.
SB Capital will continue to operate the outlet stores under the J.C. Penney banner for 21 months before a name change is made. The company is also bringing on Penney’s outlet store management team to run the business.
Penney’s decision to close its outlet stores runs contrary to the current trend in retailing that sees many chains and designers expanding. Sales in outlet stores are capturing a greater percentage of overall sales, particularly in select categories such as apparel. According to The NPD Group, total year-over-year apparel sales increased 1.4 percent for the 52-weeks ending April 2011. By comparison, apparel sales in outlet stores grew 17.9 percent during the same period.
Marshall Cohen, chief industry analyst at NPD, said the success of outlet stores is due to value conscious consumers "looking for brands they either already have, or that they trust. They want products that are tried and trusted and they don’t mind spending money on them."
- NPD Reports On Apparel Sales By Retail Channel – The NPD Group, Inc.
- J.C. Penney Will Sell Outlet Stores to SB Capital in Catalog-Business Exit – Bloomberg News
Discussion Questions: What do you make of J.C. Penney’s reported decision to sell its outlet store business? Do you expect other retailers to follow Penney’s lead?