JCPenney's (NYSE:JCP) brand-new home department will be a sales disaster and probably gone by the holiday selling season, according to analysts quoted by the Huffington Post.
Warren Shoulberg, writing about the pricey new departments installed in 500 JCPenney stores, described them as "a train wreck on the bottom line"—just after describing them as "the best merchandised, most beautifully displayed and freshest home furnishings department retailing has seen since the first Macy's Cellar in San Francisco more than 30 years ago" in the retail newsletter The Robin Report on Wednesday (July 17).
The same day, Credit Suisse analyst Michael Exstein said the glossy new home areas, stuffed with brand names that include Jonathan Adler and Michael Graves, could actually be a drag on sales instead of an advantage for the 1,100-store chain.
Penney's can't display the brand that would be most familiar to its shoppers, Martha Stewart, because of a lawsuit with Macy's (NYSE:M), which says it has an exclusive agreement for Stewart merchandise.
The basic problem is that while the revamped home departments look great, they're built around brand names that just aren't selling to JCPenney customers. The departments were the brainchild of ex-CEO Ron Johnson, whose merchandising ideas (no sales, no discounts, more fashionable merchandise) dramatically reduced traffic and revenue during the 17 months he ran the chain. New CEO Mike Ullman completed construction of the departments because it was too late to reverse course by the time Johnson was fired in April.
Ullman has reinstated sales and a number of profitable house brands that Johnson killed, and is expected to de-Johnsonize the home departments too. Some managers expect the departments to be scaled back and the space reused for dorm or holiday departments.
- See this Huffington Post story
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JCPenney Can't Get Away From Ron Johnson's Pricey Grand Vision