J.C. Penney Will Stop Selling Appliances in Latest Strategy Lurch
Penney resumed selling appliances in 2016 for the first time since 1983, as former CEO Marvin Ellison, who had earlier in his career been a senior executive at The Home Depot, sought to take advantage of the ongoing implosion at its mall neighbor, Sears. His bet was that appliances like dishwashers, washing machines, and dryers would reduce Penney’s heavy reliance on apparel and that the big-ticket items would lift margins and sales more quickly than $5 towels. He also tested ideas like home remodeling services and flooring.
But appliance shoppers did not leave Sears, for decades the biggest appliance seller in the country, for Penney; instead they continued to defect to Home Depot, Lowe’s (where Ellison is now CEO after leaving Penney last spring), and Best Buy. (BBY) What’s more, shoppers need appliances only every few years, so Ellison’s move, the cornerstone of his strategy, failed to drum up shopper traffic. Penney, which has lurched between strategies frequently in the last decade, will now double down on home goods and clothing. In 1983, when Penney was much more of a general merchandise chain (and the No. 3 U.S. retailer), it ditched appliances to focus on apparel, a much less competitive area than it is today.
“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,” Penney said in a statement. The news was first reported by Bloomberg.
Penney will continue to sell appliances in stores and online until Feb. 28 and offer free basic delivery and installation on new model purchases over $299. The department store chain will also remove furniture (except mattresses) from its stores but continue to sell it online.
During the key holiday season, Penney saw comparable sales fell 3.5% in a continuation of a poor performance in the fall, all despite a strong consumer spending environment that has lifted its main rivals, notably Macy’s, Target, and Kohl’s. The chain said in January it would close more stores, with a more exact number being disclosed later this month, adding to the 140 stores it closed two years ago. There are also a number of c-suite positions Jill Soltau, CEO since October, has to fix.
J.C. Penney, for decades a leader in home goods, has been trying to figure out how to optimize that key part of the store. In the last seven years, it has conducted two major remodeling programs of the area. In 2006, the category was 20% of Penney sales, but in 2013, that had fallen to 12%. Rivals such as Kohl’s, Target, and TJX’s Home Goods have swooped in to take Penney’s once dominant market share.