J.C. Penney Shifts Away From Appliances in Strategic Overhaul
(Bloomberg) -- J.C. Penney Co. plans to stop selling major appliances as new Chief Executive Officer Jill Soltau overhauls the troubled department store chain.
The retailer will also end sales of furniture in U.S. stores, and will sell the category online. These changes take effect on Feb. 28, the company said Wednesday.
Soltau, who stepped into the role in October, began a mission to streamline the 116-year-old retailer, closing underperforming stores and clearing out slow-moving goods to kick-start sales and improve margins. The company made the move to “better meet customer expectations, improve financial performance and drive profitable growth,” it said in a statement.
“Optimizing the allocation of store space will enable us to prioritize and focus on the company’s legacy strengths in apparel and soft home furnishings, which represent higher margin opportunities,” it said.
Alex Arnold, a managing director of the consumer practice at investment bank Odeon Capital, said he wasn’t surprised by the move.
“Penney’s was trying to throw their hat in that ring, but it doesn’t jive with the DNA of the company as customers think about it,” he said.
Former CEO Marvin Ellison had led the move into appliances in 2016, and the strategy was costly to implement because the company had to train employees or hire new ones who could sell the products. The idea was to fill the void left by Sears Holdings Corp., which hadn’t yet filed for bankruptcy but was already reining in store count.
But J.C. Penney wasn’t alone. Home Depot Inc. and Lowe’s Cos. expanded their appliance offerings, and even Bloomingdale’s jumped into the market late last year -- adding some high-end LG Electronics Inc. products, like refrigerators and washing machines.
J.C. Penney would eventually push appliances into about 600 stores. Meanwhile, furniture, including couches and bedroom sets, was being sold in about 100 locations. It’s now pulling most furniture, except from select Puerto Rico stores. Mattresses will continue to be available in more than 450 physical locations, it said.
Trent Kruse, J.C. Penney’s head of investor relations, said on a conference call with analysts in November that appliances were among product categories that underperformed in the third quarter.
J.C. Penney shares pared earlier losses and were little changed at $1.35 at 11:34 a.m. in New York. The stock has dropped about 20 percent since Oct. 15 when Soltau came on as CEO.
Same-store sales, a key gauge of a retailer’s health, slumped 5.4 percent in the three months that ended Nov. 3, far worse than the 0.8 percent decline projected by analysts.
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