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Penney's home department a drag on performance

JCP HomePlano, Texas - JCPenney is going to reset the reset. The revamped home department that debuted in more than 500 stores in June is actually less productive than home departments that didn't receive a makeover, the company said during its quarterly conference call this morning.
The shop-in-shop format built around key design personalities such as Martha Stewart and Jonathan Adler is "the best-looking home store in the industry," Penney ceo Mike Ullman said, but it's not stocked with the kind of merchandise or price points the customer wants. Slack sales in home knocked 240 basis points off Penney's second quarter comp, which declined 11.9%.
Initiatives going forward include:

  • Restoring opening price point products, a shift from ousted ceo Ron Johnson's vision of a home assortment that tilted toward better/best.
  • Expanding the window department, which was pared back for the new format. Other categories that suffered the same fate include luggage, frames and candles, which Ullman plans to restore.
  • Increasing the amount of soft home on the floor. The recently installed layout carries a heavier mix of hard goods. Ullman noted that while hard home merchandise provides better margins, soft home has traditionally been a traffic driver for the store - especially when promotionally priced. "We went too far," he said.
  • Returning to classification merchandising in key categories such as towels, sheets, pillow and pads.
  • Reintroducing multi-piece bed sets, a process that has already begun.
  • Stocking more traditional merchandise in home to rebalance the department, which recently pivoted toward contemporary.
  • Using the home aisles for merchandising. In some stores, the aisles are 18 feet wide.
  • Restoring more than 1,000 cash registers to the floor. Store associates will remain equipped with iPads.
  • Putting more focus back on private label brands across the store, returning house brands to 50% of the mix.
  • Bringing back the retailer's tiered loyalty program.

Ullman said the shop-in-shop format for the home department is still uncompleted in the 30 of the 550 stores selected for the makeover. But the home business online is healthy, he added, suggesting the store format is also contributing to lower sales.
In addition to alienating core customers, many of the transformational changes made to the stores and the merchandise last year failed to deliver new customers, said Ullman.
"We actually attracted few new customers in 2012 than in any of the previous 10 years," he said. "We actually lost more customers than we gained."
The company's net loss for the quarter ended Aug. 3 widened to $586 million from a net loss of $934 million in the year-ago quarter. Sales dropped 11.9% to $2.66 billion.
For the six-month period, net loss deepened to $934 million compared to a net loss of $310 million in the first half of the previous fiscal year. Sales tumbled 14.2% to $5.3 billion.




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