Home hurts JCPenney in stores, online  

-- Home Textiles Today, 11/14/2008 1:54:00 PM

Plano, Texas – Home sales proved bitter on two tiers for JCPenney during the 1,093-unit mid-tier department store chain’s third quarter.

Home failed not only in stores, but its weakness also hindered JCP.com from making gains as it had done progressively in past quarters.

“JCP’s internet business has also been impacted by the weakness in home division sales,” said Ken Hicks, president and chief merchandising officer during this morning’s earnings call. “For the quarter, www.jcp.com sales decreased approximately three-fifths of a percent, versus an 11.8% increase last year, as a result of home merchandise comprising a significantly larger portion of catalog and online sales than it does in our stores.”

Still, the e-commerce site recently reached a milestone, noted Mike Ullman, chairman and ceo. “JCP.com just passed the $1 billion sales level at the end of third quarter, so we feel very good about a record-setting fourth quarter,” he said.

Ullman emphasized that JCP remains committed and optimistic about its home businesses going forward, regardless of its current status, because of its deep roots among longtime and new shoppers. “Our home businesses are weak for us now, but it’s important to understand that we are the leader in this area, which will be a critical advantage when the market turns,” he said. “Our home assortments are edited and consistently getting better.

“Our new brand, Linden Street, appeals to younger families with popular prices, and the customer response has been very positive.”

JCP quarterly net income plunged to $124 million, or 55 cents per share, down from $261 million, or $1.17 EPS in the same period one year ago.

Sales dropped 8.7% in the quarter to $4.3 billion, with comps sliding 10.1%. Year-to-date sales have fallen 5.5% to $12.3 billion, with a nine-months comp drop of 7.3%.

Other news in the third quarter included reduced inventories, which were down 5.6%, “despite the addition of 35 new stores since last year’s third quarter,” Hicks said. “We are satisfied with our inventory position, which is down approximately 9% on a comparable store basis vs. last year, in alignment with our expectations for sales trends over the remainder of the year.”

For the Christmas shopping season, Ullman said the retailer is “supporting our holiday assortment through a comprehensive marketing campaign” that emphasizes its brands and “quality at very affordable prices.”

The marketing effort also includes enhanced efforts in regions within reach of a going-out-of-business Mervyns store.

“We’re aggressively marketing … in areas where Mervyns stores are closing to make sure that Mervyns customers know that JCPenney is their new shopping destination.”