J.C. Penney's turnaround suffers holiday setback

Dive Brief:

J.C. Penney said Friday that same-store sales for its nine-week November and December holiday period fell 0.8% compared to the same period last year, with e-commerce sales experiencing double-digit growth in the period.
After a slow start in the first three weeks of November, which included the U.S. presidential election, overall same-store sales rose in the six weeks between Thanksgiving week through the end of December, J.C. Penney said.
Appliances, outerwear, boots, toys, Sephora cosmetics and fine jewelry fared well, but weakness in women's apparel took a bite out of the discount department store's overall holiday performance.

Dive Insight:

J.C. Penney's surprise comeback suffered something of a setback over the holidays. "The first three weeks of November proved to be challenging in stores, consistent with the trends in the broader retail industry,” Marvin R. Ellison, chairman and CEO, said in a statement.

The report came in the same week as similarly disappointing results hit Macy’s, which announced further store closings and job cuts, and Kohl’s, which cut its guidance for its full year.

Penney’s holiday sales recovered somewhat as the period wore on, however, and company’s relatively strong showing in digital sales vindicated its omnichannel efforts, which include shipments to any J.C. Penney store, same-day pickup and faster home delivery, Ellison said. The retailer has said that by some time this year, it will offer standard fulfillment speeds of two days or less to more than 95% of U.S. customers: Executives last summer noted that J.C. Penney's history as a catalog company means that it has the infrastructure to offer speedy omnichannel services.

“This validates the strength of our omnichannel strategy as efforts to improve site functionality, expand fulfillment capabilities, offer flexible shipping options and introduce a broad assortment of new product categories were instrumental to this digital sales growth,” Ellison said.

While J.C. Penney has profited from the woes of Sears, which has ceded sales in appliances (a space to which Penney’s just recently returned), and is doing particularly well with beauty thanks to its successful Sephora concessions, the holiday results show that the retailer still has some distance to go in its comeback. Although its online sales were stronger, those come with higher fulfillment costs that, along with discounting, have hit margins for many retailers this season. Still, J.C. Penney reaffirmed its fiscal 2016 full-year earnings target of $1 billion before interest, tax, depreciation and amortization.