J.C. Penney turnaround faces big test with home goods relaunch

Thu Mar 13, 2014 12:09am EDT
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By Phil Wahba

(Reuters) - J.C. Penney Co Inc (JCP.N: Quote) is about to undo the centerpiece of former Chief Executive Officer Ron Johnson's failed vision to take the retailer upmarket.

On Thursday, the department store chain is relaunching its home goods sections. It has brought back many of the more affordable, no-frills brands the former Apple executive ditched and reduced the space given to trendier brands he thought would bring in new shoppers.

Penney is trying to rebuild its home business by offering more lower priced items, more in-house brands and additional floor space for basics like towels and comforters. The retailer wants to recapture former clients and go head to head with rivals like Target Corp (TGT.N: Quote) and Kohl's Corp. (KSS.N: Quote)

Fixing the home business is crucial to Penney's fledgling turnaround, both in-store and online, where it generates half of jcp.com's sales.

"Home is a traffic driver for the whole store," said Jan Hodges, senior vice president in charge of Penney's home goods business. Store visits fell 17 percent during Johnson's term and continued to slip in 2013.

The company, once a leader in the sector, saw sales of home goods plummet to about $1.3 billion in 2013 from $4.2 billion seven years earlier.

In 2006, home products generated about 20 percent of Penney sales, on par with rivals Macy's Inc (M.N: Quote), Kohl's Corp (KSS.N: Quote) and Target Corp (KSS.N: Quote). Last year, they were about 12 percent.

To be sure, some of the decline stemmed from its decision to get rid of its catalog order business in 2011, but most of it was from misreading its customers.   Continued...

Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid