J.C. Penney Doubles Down on Nike as Kohl’s Gets Set for Under Armour
January 18, 2017
The athletic wear wars are coming to a department store near you.
J.C. Penney (JCP) is raising its bet on Nike (NKE) by carving out 500-square feet of space in prime spots at hundreds of its stores, to better showcase the booming sportswear brand it has long carried, just as rival Kohl’s (KSS) gets set to start selling Under Armour (UAA) at its 1,162 stores in March.
The Dallas Morning News earlier reported the news.
In addition to what is akin to a shop-in-shop at 600 of its 1,000 stores, Penney has added women’s, children’s and special sizes to its Nike assortment.
The tactics by both chains illustrate the ongoing boom in activewear and how crucial the category is for driving traffic to department stores, something all retailers are struggling with right now. Both Kohl’s and J.C. Penney, along with Macy’s and Target, have reported weak holiday season sales and weak store traffic, and all of those chains have ramped up their activewear offerings.
“We want to have the best expression of Nike in any department store,” Penney Chief Merchant John Tighe told the Dallas Morning News. “Nike is not only the largest athletic apparel brand, It’s also the largest apparel brand in the world.” J.C. Penney did not immediately respond to a request from Fortune for comment.
According to the Dallas newspaper, Penney tested the Nike shop last summer in Portland, Ore., near Nike headquarters in Beaverton. The shops have enhanced graphics, updated fixtures, mannequins and a large signature Nike swoosh from the ceiling.
The moves by both chains illustrate how crucial national brands like Nike are to department stores even as Penney looks to increase the share of sales it gets from house brands to 65% from 50%, and Kohl’s continues to refresh its own brands. Kohl’s also gets about half of its business from its own brands.
Nike’s North American revenue rose 5% last quarter, building on what has been years of stratospheric growth for the brand. And at Under Armour, a primarily domestic and smaller brand, revenue rose 16%, the kind of growth that would make any department store salivate.
The benefits go both ways for sportswear brands and department stores: NPD Group found last summer that activewear sales at department stores were rising about 5%, but declining at sporting goods stores and specialty clothing chains.
And for Under Armour in particular, the deal with Kohl’s is seen as a way for the male-skewing brand to make further inroads with women, who are 80% of Kohl’s clientele. (Another rival, Macy’s (M), sells both brands. Penney does not carry Under Armour.)
As for Penney, the bet seems to be on getting a boost similar to what it gets from its Sephora boutiques, where sales-per-square foot run about four times the store average. Indeed, Tighe told the Dallas Morning News that athletic apparel has been the fastest growing category in the store.
At Kohl’s, sales of activewear and wellness accessories rose 15% at Kohl’s in 2015 and the company aims to build the category to 20% of its total annual sales, or about $4 billion.