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Home a Drag on JCPenney Direct

JCPenney suffered setbacks in its otherwise rapidly growing direct business because of lagging sales in the most critical segment — home merchandise — the retailer said during its fourth-quarter and year-end earnings call last week.

"We saw improvements in all apparel areas in direct, but those gains were offset by a continued softness in home merchandise, which represents the largest portion of the direct business," explained Ken Hicks, president and chief merchandise officer.

Overall, direct sales — which include the internet and catalog businesses — decreased 1.2% on a comparable 13-week basis.

"We continue to manage the transition of our direct channel to that of an internet-dominated business, supported by print catalogs with better customer targeting," he said. "In addition, we find that our print customer is using for ordering, making our catalogs a powerful marketing tool."

He went on to say that "continues to be our fastest growing channel," resulting in a 17.6% increase for the quarter, and an increase of more than 22% for the year.

Supporting the website's growth is the recent rollout into stores of 35,000 new point-of-sale terminals connected to, "making it easier for us to offer in-store customers our full assortment of currently over 250,000 skus," Hicks said. "And early results show that our associates and customers are taking advantage" of this new in-store convenience.

On its guidance for the home category in its direct business, chairman and ceo Mike Ullman said, "We believe we have room to improve soft home online."

The company is also streamlining its direct sourcing to focus on working with a select group of factories in the Far East. "We have reduced the number of factories we do business with overall and we see that going forward," Hicks said. JCP said it has reduced that number by 20% to 30%.

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