JCPenney has seen the future of its home business and it is major appliances.
One year after reentering the category, the retailer is expanding its majap presence with additional brands and doors.
Speaking to analysts during a fourth-quarter earnings call last week, chairman/CEO Marvin Ellison indicated that the department store chain will bring its white-goods showrooms to an additional 100 locations early this year for a total of 600 stores, and will add more appliance brands, as yet unnamed, to the assortment.
“We’re exceptionally pleased with the performance of our over 500 new appliance showrooms, which continue to drive increased sales and gross margin dollar productivity,” he said. “Appliances reinforce the ongoing strength of our growth initiative as we pivot our retail strategy towards non-apparel and growing categories.”
Ellison said appliance sales are driving “significant comp growth” both in-store and online, and described the category as “a key component to increase our revenue per customer.”
Majaps have also had “a big impact” on company margin amid what he described as “a very challenging 2016 retail environment.”
Indeed, along with the majap expansion, Penney is also planning to close 130 to 140 of its 1,000 stores in order to allocate capital more efficiently to a smaller store base, and is offering some 6,000 employees early retirement packages.
As an adjunct to its appliance initiative, Penney will also begin testing a return to home installation services, including HVAC through a partnership with Trane.
“Many years ago JCPenney was a strong player in the home install space. Now that we have a large mall competitor donating market share in this category, we feel the timing is right for us to test a series of home install initiatives,” Ellison said.
The CEO also cited Sears as an additional impetus behind the appliance buildout.
“We share over 400 malls with a struggling retailer that was once dominant in this category and we have some in-house talent that understands this space really well,” he said.
Sears’ major appliance revenue fell 19 percent, to $4.2 billion in 2015, placing it third on TWICE’s Top 50 Major Appliance Retailers ranking, behind No. 1 Lowe’s and second-place The Home Depot.
Penney’s appliance departments presently feature 100 to 215 kitchen and laundry products from Samsung, LG, GE and Hotpoint, including Samsung’s eye-catching Family Hub fridge and LG’s innovative front-load washer/ventless dryer combo.
Newly opened departments have been heralded with special events including complimentary carnations, refreshments, free salon silver hair chalking and drawings for prizes, while promotions included extended financing and free delivery and basic installation.
Hat tip to Seeking Alpha for the earnings call transcript.