Tuesday, January 19, 2016 8:56:08 PM
Source: Dow Jones News
By Suzanne Kapner
In 1983, J.C. Penney Co. got out of the appliance business, so it could make more room for apparel in its department stores.
Now, the company is bringing back washers, stoves and other large home appliances as Penney seeks to claw back some of the sales it ceded to rivals.
The move is the latest attempt by a department store chain to make its giant stores more productive by adding goods that people are buying at a time when sales of core offerings like apparel and accessories are sluggish. Macy's Inc. recently added consumer-electronics areas in a handful of stores through a partnership with Best Buy Co.
"This is an opportunity to increase sales productivity and give shoppers what they are looking for," said Penney CEO Marvin Ellison, who previously worked for a dozen years at another big appliance seller, Home Depot Inc.
Penney is trying to recover ground lost to a failed overhaul by former CEO Ron Johnson. Analysts expect its sales for the current fiscal year, which ends this month, to be more than $4 billion below 2011 levels, when they totaled $17.3 billion. Particularly hard hit were home goods such as bedding, towels and kitchen tools, which accounted for 18% of sales in 2010, but fell to 12% in 2014.
To get existing customers to spend more, Penney executives began asking the question: "What would shoppers buy if we sold it?" Mr. Ellison said.
It turned out that appliances were one of the top items that shoppers searched for on Penney's website. Mr. Ellison saw an opportunity to add back appliances in departments adjacent to those that sell bedding, drapery and other items for the home.
After surveying more than 1,000 shoppers and hiring a consulting firm to further analyze the move, Penney plans to reintroduce appliances to stores in San Antonio, San Diego and Tampa, Fla. beginning Feb. 1.
The stores will carry between 90 and 150 kitchen and laundry models from General Electric Co., Hotpoint, LG Electronics Inc. and Samsung Electronics Co., and Mr. Ellison said he is prepared to expand appliances to more stores if the initial test is a success. To make room, he plans to scale back some of the floor space dedicated to furniture.
In doing so, Penney would be taking on Sears Holdings Corp., which still is the nation's top appliance retailer, according to TraQline, a market share tracking survey owned by The Stevenson Co.
Sears, which held a 25.5% share of appliance sales as of September, down from 33.3% in September 2006, has faced increasing competition from Lowe's Cos., Home Depot and Best Buy. Together, those four retailers command nearly 70% of the U.S. market, according to TraQline.
Mr. Ellison said he wasn't worried about muscling into a crowded field. "We don't see Home Depot in our competitive set," he said, noting that slightly more than half of the home improvement chain's customers were men, while 70% of Penney's customers are women.
(END) Dow Jones Newswires
January 19, 2016 19:37 ET (00:37 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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