Opinion: J.C. Penney’s appliance adventure
Large appliances are back at select J.C. Penney stores after a 30 year hiatus and when — not if — the merchandising initiative is rolled out more broadly the contribution to same store sales growth could be huge.
On Feb. 1, shoppers at 22 J.C. Penney stores in San Antonio, San Diego and Tampa got their first look at the department store retailer’s approach to selling appliances. A large portion of the home department in the test stores has been set aside to offer shoppers an assortment of between 90 and 150 appliances from leading brands such as GE, Hotpoint, LG and Samsung. The value proposition promised to shoppers is much the same as it is with other leading appliance retailers: leading brands, knowledge service, free delivery and set-up, price matching.
An early read on how well that approach resonates with shoppers is likely to be offered on Feb. 26, when J.C. Penney is scheduled to report fourth quarter results and CEO Marvin Ellison provides an update on the company’s performance and 2016 outlook. Regardless of what Ellison has to say about the appliance initiative less than four weeks into the pilot program, odds are in favor of the company being successful with a more meaningful expansion to come later this year.
The main reason why has everything to do with Ellison’s background and that of the team he has assembled who understand the appliance business as well, if not better than, some of those from whom the company will be looking to gain share. Ellison spent 12 years at Home Depot, last serving as executive VP with oversight of more than 2,000 stores before he joined J.C. Penney in Nov. 2014. In mid-2015, Ellison replaced Mike Ullman as CEO and one of his first key hires was to name Michael Amend, Home Depot’s former VP of online, mobile and omnichannel to the new role of executive VP of omnichannel at J.C. Penney. At the same time, the company also brought in Target’s former senior VP global supply chain to serve in a similar capacity.
“Their backgrounds perfectly align with our long-term growth plan to become a world-class omnichannel retailer,” Ellison said when the appointments were made.
Just last month, Ellison named another Home Depot veteran to a key operations role. Joe McFarland spent 20 years at Home Depot in a variety of sales and operations roles and was named executive VP stores at J.C. Penney. In that role he leads the operations of all 1,000 J.C. Penney stores including the implementation and support of initiatives such as same day pickup, in-store jcp.com fulfillment and improving sales productivity.
“Joe is an outstanding, solutions-driven leader with a proven track record of implementing in-store omnichannel initiatives, driving operational excellence and superior customer service within a highly competitive retail landscape," Ellison said when McFarland’s appointment was announced.
Ellison, Amend and McFarland have intimate knowledge of the appliance business, the operational challenges and strengths and weaknesses of the competitive set. If it weren’t for their backgrounds at one of the nation’s largest sellers of appliance, J.C. Penney’s pilot program might seem like a desperate measure by a retailer grasping for growth. Instead, introducing appliances seems like a sure fire way for the company to make itself more relevant to customers with an eventual rollout serving as a catalyst for same store sales growth for years to come.
CENT gets it right in Q1
Central Garden & Pet Company's first-quarter performance put president and CEO John Ranelli in a gratified mood.
“We are right where we want to be. Our strategic initiatives are working,” he said.
“We are growing organically. We are starting to demonstrate the potential of Central’s operating leverage by increasing gross profits significantly more than SG&A. We are showing our willingness and ability to manage and improve our portfolio, through organic growth, making accretive acquisitions and divesting non-strategic assets.
Net sales for the quarter ended Dec. 26, 2015 increased 17% to $359.8 million, up from $307.3 million last year.
The growth was mostly a 50/50 split between organic and acquisition-related.
Net loss widened to $8.6 million compared to a loss of $5.7 million the previous year, however.
Additionally, the sales growth was divided according to segment. Net sales for the Pet segment were up 25%, while the Garden segment only increased 3%.
"While I am very pleased with the progress we are making, we still have a lot of work to do, particularly in our Garden segment," added Ranelli.
The company is increasing its guidance for the full year. It now expects adjusted earnings per fully diluted share to grow at least 35% for the year, to $1.00 or higher.