J.C. Penney (NYSE:JCP) has not had an easy few years. The chain's woes date back to 2011 when it hired former Apple (NASDAQ: AAPL) retail executive Ron Johnson as its CEO.
In his disastrous 17-month tenure, Johnson got rid of much of what the company's loyal customers liked about the brand. The CEO knew that the retail marketplace was changing, but he misjudged how to react to those changes and only lasted 17 months before being replaced by his predecessor, Myron Ullman.
After righting the ship, or at least slowing down its sinking, Ullman gave way to Marvin Ellison, who has slowly rebuilt the brand. It's not smooth sailing ahead for J.C. Penney, but there are reasons to believe the company has a chance at reversing its fortunes.
The holidays were strong
After a disappointing 2016 holiday season sapped some of its turnaround momentum, J.C. Penney delivered in 2017. The company saw a same-store sales increase of 3.4%.
"We are very encouraged with our overall comp sales performance during the holiday season, which was led by home, beauty and fine jewelry. Additionally, our apparel categories continue to demonstrate improved comp performance, particularly in women's and kids," said Ellison, in a press release. Ellison noted that e-commerce comps grew by double digits as well.
Sears is dying
Sears (NASDAQOTH:SHLDQ) and J.C. Penney court the same customer. Both companies have struggled, but Sears' problems have been worse with the chain steadily shrinking as it tries to free up capital in order to keep operating.
That has opened an opportunity for J.C. Penney, which the company has capitalized on. The chain has added appliances to over half of its stores, targeting markets its rival has abandoned. In addition, J.C. Penney has moved into home services in select markets.
As Sears continues to shrink (and perhaps goes out of business), J.C. Penney is well-positioned to capitalize.
The chain is becoming a destination
As shopping on the internet has become more convenient, it takes more to get consumers to leave their houses. If a person just needs a wrench or a new shirt, those things can easily be purchased online, so stores need to give consumers more reasons to visit.
J.C. Penney has successfully done that by adding a number of features to its stores. These include revamped salons (it's hard to get a haircut online), toy departments, Sephora stores, and other store-within-a-store concepts.
Customers who come in for one reason may buy other things or at least they will be exposed to the chain's merchandise. Creating a store that's a destination for more than shopping increases foot traffic and at least gives a retailer a chance to make sales.
A long way to go
J.C. Penney's turnaround is by no means a sure thing. The company has made lots of solid moves, but it still sits in a precarious position where it would not take many mistakes to send the company down the same path that seems inevitable for Sears.
Still, unlike its rival, J.C. Penney has made strong moves that have its needle at least tentatively pointing upward. The chain is going to have to fight for every inch, because even if Sears exits the marketplace it has no shortage of competitors. But, there are reasons to be hopeful, which is something you couldn't say just 12 months ago.
Daniel B. Kline owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.