Penney heavily promotes radical makeover of its Home good section

Posted Monday, Jun. 10, 2013  comments  Print Reprints
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Karen Keys of Richland Hills is the sort of customer J.C. Penney would like to woo back.

Keys, who was inspecting the merchandise Thursday at an area store, didn’t like the retailer’s switch to “fair and square” pricing, which cut out sales and coupons and replaced them with everyday lower ticket prices. The stylish clerical worker, who enjoys working sales and coupons to strike the best deal (“I never pay full price,” she said), stayed away for months, like all too many customers of the chain.

Last week, Penney blitzed the country with lavish multimedia ads to throw attention on the expensive and complete makeover of the Home department in 500 of its 1,100 stores. The effort to please Keys and other shoppers is crucial for the Plano-based chain, which had a whopping 25 percent drop in sales last year.

With the Home department once responsible for about a fifth of sales, “it’s critical that they get it right,” said retail consultant Robin Lewis, author of The New Rules of Retail. “And that’s why they are staging their largest launch event ever — a nationwide housewarming event.”

Retail consultant Kathy Gersch said bluntly: “They are at a point where they have to start turning the ship around or they won’t be around in this world.” Gersch, of Seattle-based Kottler International, continued, “Historically, the Home section was a profitable area for the company and something that was driving traffic into the store.”

This key category includes kitchen, furniture and bedroom goods whose sales were hurt during the 17-month tenure of former CEO Ron Johnson, the ex-Apple store chief whom Penney canned in April and who was replaced by his predecessor, Mike Ullman.

“It’s safe to say we hit the low point of home in terms of share penetration,” Ullman told The Associated Press at a launch event Thursday in New York. “Now it’s a question of building it back up.”

Ullman said the new home lines range from classic to modern and should appeal to Penney’s broad mix of shoppers. There are more gift items and furniture than previously, and the company has brought back its drapery business.

For Keys, J.C. Penney wasn’t usually a first choice, aside from some Christmas shopping. But last week she came to look over the radically different Home section after getting mailers and coupons. The store was almost empty on what was the first day of the rollout but before several days of in-store demonstrations and free gifts were scheduled.

“It does seem more bright and open. I think it’s good,” Keys said of the sparsely filled merchandise displays. “Everything is all different — in a good way.”

That doesn’t mean Keys approved of everything she saw. She was taken aback by $15 boxes of Martha Stewart cake mixes and $10 jars of Martha Stewart peanut butter and somewhat surprised by prices on nonsale items. “I imagine you’re paying for the name on it,” she said, adding that she’d give the department a try.

“Penney’s dilemma,” Gersch said, “is that they haven’t been attracting enough new customers, and old customers are not going to be interested in a $15 cake mix that they can buy for $1.95.”

The remodeled Home departments have updated flooring, accent lighting, custom fixtures and a widened pathway to create “an inspiring environment” for shopping a “curated” selection of affordable, high-quality furnishings by highly recognizable designers and trusted brands, Penney said.

Sales of Home section goods fell to 12 percent of the chain’s approximately $13 billion in sales. That’s down from 15 percent of $17.3 billion in total sales before Johnson began remaking Penney last year. And sales were undoubtedly hurt in recent months at the more than 500 stores that were extensively renovated, Morningstar analyst Paul Swinand said.

Aside from scaling back promotions, Johnson shook up the chain by killing some once-popular house brands and announced that he had signed Stewart and designers Jonathan Adler and Michael Graves to produce exclusive products for their “store-in-store” spaces dotting the Home department. But it has taken more than six months to remodel and stock, and Penney offered little in the meantime.

And then there was a Macy’s lawsuit in New York, which barred Penney from showcasing all the Martha Stewart items it wanted because its rival claimed to have an exclusive contract. That was a big loss, the Dallas-reared Gersch said.

“Martha Stewart was supposed to be the flagship of that new Home strategy,” she noted. Aside from the cake and cookie mixes, there is a “Martha Celebration” party decoration corner and a line of her cookware that is sold under the “JCP Everyday” label, with no mention of the lifestyle guru.

To make everything more difficult for the chain, a TV reporter in Cincinnati reported how Penney executed its return to pre-Johnson pricing by simply placing higher-price stickers over old ones before placing the item on sale.

Penney should have used a whole new ticket, Gersch said. “Either replace it entirely or maintain the price, not artificially inflate it so they can then discount it. What they did breaks a customer’s trust with their brand. And the customer might not come back. If that happens, you’re in trouble.”

Gersch said the Home rollout is not a true test of Ullman’s leadership because the pipeline was full of Johnson’s merchandise. Back-to-school sales, she went on, will give Ullman his first chance to showcase his team’s merchandising skills.

Lewis is optimistic, perhaps more so than other industry observers.

“I believe there are parts of Johnson’s strategy that Ullman will keep and actually expand on,” the retail consultant said. “Johnson’s [no-sale] pricing strategy by his own admission was the single bomb that blew it all up. So forget tweaking it. They need to bomb it back to the pricing strategy customers understood. “By the time all of Ullman’s stabilizing and repositioning plays out, and returns J.C. Penney to growth, Ron Johnson will have been forgotten about.”

This report includes material from The Associated Press.

Barry Shlachter, 817-390-7718

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