• Cecile Corral

Home Hurts JCPenney in Stores, Online

Home sales proved bitter on two tiers for JCPenney during the 1,093-unit mid-tier department store chain's third quarter.

Home failed not only in stores, but its weakness also hindered JCP.com from making gains as it had done progressively in past quarters.

"JCP's internet business has also been impacted by the weakness in home division sales," said Ken Hicks, president and chief merchandising officer. "For the quarter, www.jcp.com sales decreased approximately three-fifths of a percent, versus an 11.8% increase last year, as a result of home merchandise comprising a significantly larger portion of catalog and online sales than it does in our stores."

Still, the e-commerce site recently reached a milestone, noted Mike Ullman, chairman and ceo. "JCP.com just passed the $1 billion sales level at the end of third quarter, so we feel very good about a record-setting fourth quarter," he said.

Ullman emphasized that JCP remains committed and optimistic about its home businesses going forward, regardless of its current status, because of its deep roots among longtime and new shoppers. "Our home businesses are weak for us now, but it's important to understand that we are the leader in this area, which will be a critical advantage when the market turns," he said. "Our home assortments are edited and consistently getting better.

"Our new brand, Linden Street, appeals to younger families with popular prices, and the customer response has been very positive."

JCP quarterly net income plunged to $124 million, or 55 cents per share, down from $261 million, or $1.17 EPS in the same period one year ago.

Sales dropped 8.7% in the quarter to $4.3 billion, with comps sliding 10.1%. Year-to-date sales have fallen 5.5% to $12.3 billion, with a nine-months comp drop of 7.3%.

Other news in the third quarter included reduced inventories, which were down 5.6%, "despite the addition of 35 new stores since last year's third quarter," Hicks said. "We are satisfied with our inventory position, which is down approximately 9% on a comparable store basis vs. last year, in alignment with our expectations for sales trends over the remainder of the year."

For the Christmas shopping season, Ullman said the retailer is "supporting our holiday assortment through a comprehensive marketing campaign" that emphasizes its brands and "quality at very affordable prices."

This marketing effort also includes enhanced efforts in regions within reach of a going-out-of-business Mervyns store.

"We're aggressively marketing…in areas where Mervyns stores are closing, to make sure that Mervyns customers know that JCPenney is their new shopping destination."

Real estate plans for next year are more modest than 2008. There are 17 new and relocated units slated for 2009. During 2008, JCP had planned 35 new openings as well as 21 major renovations, three expansions, 90 store refurbishments and updates, and significant fixturing improvements in more than 600 stores across the country — all of which have already been completed.

J.C. Penney Company, Inc.

Qtr. 11/1 (millions) 2008 2007 % change
a.Includes one-time state and federal income tax benefits of $0.14 per share.
Sales $4,318 $4,729 (8.7)%
Oper. Income (EBIT) 255 411 (38.0)
Net income 124 261 (52.5)
Per share (diluted) 0.56 1.17a (52.1)
Average gross margin 38.5% 39.7%
SG&A expenses 30.1% 28.5%
Nine months
Sales $12,727 $13,470 (5.5)%
Oper. Income (EBIT) 746 1,159 (35.6)
Net income 361 681 (47.0)
Per share (diluted) 1.62 3.01a (46.2)
Average gross margin 38.6% 39.8%
SG&A expenses 30.2% 28.8%

Cecile CorralCecile Corral | Senior Product Editor, Home & Textiles Today

Cecile B. Corral has been a product editor with Home Textiles Today since late 2000. She covers the area and accent rug, kitchen textiles, table linens, beach towels, decorative bath and decorative pillow categories, as well as some retail subjects.

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