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In home, brands will make all the difference

JCPenney is looking at its private and national brands to offset competition in commodity products for its home lines, especially home textiles.

In addition, said Charlie Chinni, executive vp, home, fine jewelry, and family footwear, "we have some strong differentiators — our tri-channel merchandising, custom decorating and our dominant window business — in our home textiles business."

"We've had double-digit growth in our bed and bath comps in both 2001 and 2002," Chinni related during an interview at the company's Plano, TX, home office after the annual shareholders' meeting last month.

While this year has been tough for bed and bath, "it's getting better already, we're comping up now," he stated. Helping, he said, is the balance between price and value with fashion. "We have a well-balanced opening price point assortment and then fashion with brands and private label."

In analyzing Penney's position in the competitive retail scene, he said, "we can leverage our strengths, but we still compete head-to-head where we have competition with in-depth, in-stock, right assortments focused for heads on."

Seeking clarity

One of the challenges for home textiles, Chinni believes, "is that the industry has a lot of troubled players. This opens the door to smaller companies and overseas players with sourcing capabilities as well as our own product development division to fill this void. I hope we make progress on the domestic front for stability, but the large players clearly are in flux."

The home textiles industry, he contends, "needs product innovation and salable goods. We need newness of product to capture customer interest."

And the company's window covering business "is clearly a differentiator," along with fine jewelry, women's and kids, plus sizes and men's clothing, he explained. "Without catalog, we wouldn't have the window business we do. It's very sku intensive — but it's the same with some bed and bath products, like bed skirts and the 42-color JCPenney towel, where we have another strong statement to make."

While Penney is the leader in soft window coverings "with a powerful combination of value, in-stock positions, fashion merchandise and great selling associates, we're not doing as well in hard window." It's more competitive, Chinni explained, "but we're making progress in assortments."

In soft window, the company has a strong program for training salespeople, as well as commission selling, he noted.

Crossing channels

While he says there is "clearly a separate customer for the Internet, catalog and retail, there is a benefit to be derived" in simple things such as picking up or returning merchandise to a store from a catalog purchase.

"We buy and pick many catalog patterns" that are the same as the retail assortment, "but catalog has 100 bedding patterns and retail has 20 to 30." On non-retail items, catalog is financed through that division's P/L.

Overall in home textiles, he added, "we have raised our business above head-to-head via brands and private label. And, our tri-channel experience offers the best combination in retailing. We integrate two- to three-day deliveries with wide assortments." And catalog, he added, "is real close to breaking even" after several years of planned decreases to reengineer the entire program. "It's very important to home. We can satisfy a complete home's decorating via the catalog."

Another significant home differentiator, Chinni reported, is the company's custom decorating business, "which has been growing in the last couple of years, though the first quarter has been a little slower than the rest of home. We're the leading home decorating business in the country — and it's totally vertical with our own workrooms, and profitable." Industry estimates put the customer decorating business in the neighborhood of $175 million.

The company's freestanding home stores, now numbering in the mid-30s, "are my best performing stores," Chinni said. But, ironically, as the company strives to regain its total store position, "there are no more planned for the future. They're great labs, and we get lots of ideas and product directions, especially in furniture."

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