While the end of Sears (SHLD +0.00%) seems like an inevitability, J.C. Penney (JCP +0.00%) no longer sits on the brink of its own demise.
The company may not be thriving, but CEO Marvin Ellison has mostly stopped the bleeding. While that doesn't mean the chain has clear sailing ahead, it does appear it is on the right path, and some positive results have emerged.
In Q1, for example, the company saw an overall dip in sales, but that was driven by a down February. In March and April -- actually through the last 10 weeks of the quarter -- the retailer delivered positive comps compared to the same period last year. That momentum continued into May and Ellison, speaking at the 37th Annual Piper Jaffray Consumer Conference, expects the chain to have a solid quarter.
"We believe that Q2 will be a significantly better quarter than Q1," he said, according to a transcript of the event provided by S&P Global Intelligence. "And we believe that's in part due to the fact that we've made some specific initiatives to address the decline in apparel."
Ellison isn't just shuffling up merchandise mixes in his stores. He's changing how J.C. Penney positions its business and working to give consumers multiple reasons to leave their homes.
J.C. Penney has added appliances to more than half its stores. Image source: J.C. Penney.
What is J.C. Penney doing?
Ellison made it clear that his number one goal is giving "existing customers more reasons to shop and more things to buy in J.C. Penney." That's a broad idea that encompasses everything from offering exclusive experiences like in-store Sephora shops to targeting both plus-size female customers and big and tall men.
What we've learned exclusively is that if you are a plus-sized female customer or big and tall man, it's hard to buy apparel online exclusively. So our ability to lean in into plus size and lean into big and tall is because we think it's an underserved market ... So we think that's a huge growth opportunity for us, and it's proven to be that.
The retail chain has also found growth by offering in-store services including its partnership with InStyle salons.
"You can't get your hair done online," Ellison said. This is "tremendously beneficial to us because when you are salon customer for J.C. Penney, you shop twice as often as an online customer and you spend twice as much."
Go where the opportunity is
In addition to expanding its offerings to include things digital rivals can't offer, J.C. Penney has stepped into niches abandoned by rivals including Sears. That has included a major expansion into appliances as well as other areas.
"Our entry into appliances, furniture, mattresses, home and in-store services is because number one, we have a competitor that's donating market share," Ellison said. "That's the competitive side of it. But on the other side, these are very difficult services and/or products to sell exclusively online."
The CEO explained that these are expensive items requiring consultation that people want to touch. J.C. Penney has gone from not selling appliances at all to doing so in over 600 stores in less than a year.
It's a smart strategy
Sears' recent strategy has been to close stores and sell assets in order to generate the cash to survive. That's a game the company will eventually lose because market conditions are not going to change -- they will likely get worse.
While its rival retreats J.C. Penney has been retooling. Yes, the company did close some stores, but those were strategic moves in markets that could not support the business long-term.
Mostly J.C. Penney has moved forward by trying and testing concepts then acting on them quickly when they work. There's clearly no single magic bullet that saves retail from the internet. Instead, as Ellison has shown, salvation comes from filling niches, moving into markets abandoned by others, and giving people what they want, in the way they want it.
