J.C. Penney (JCP) was the surprising winner of last year's holiday season, as an extra early opening on Thanksgiving Day followed by several weeks of the consistent marketing of deals to price sensitive consumers led to a cheery 4.1% jump in fourth quarter same-store sales.
Although it will be difficult to replicate such a stunning sales performance for a department store this time around, J.C. Penney executives are clearly not shy in trying to make it happen. In addition to opening again at 3:00 p.m. on Thanksgiving Day this year -- while mall rivals Macy's (M) and Sears (SHLD) open at 5:00 p.m. and 6:00 p.m., respectively -- J.C. Penney is fresh off launching a new low price guarantee for its national brands such as Nike (NKE) .
To speed up what J.C. Penney admits was a painfully slow checkout process last year, it has replaced 7,000 cash registers out of a total of 26,000 company-wide. Those registers that didn't get replaced received a systems upgrade to improve checkout efficiency. The company also added 18,000 new scanning guns at its registers that allow for the scanning of coupons -- beloved by its price conscious customers -- on the J.C. Penney mobile app. A year ago, it didn't have that capability.
Those product categories, such as big and tall sizes, that have been such a hit among J.C. Penney's middle America shoppers received extra inventory so the company doesn't miss out on sales during the holidays. Meanwhile, roughly 200 J.C. Penney stores are now able to ship product directly from stores to service orders placed online. All 1,000 J.C. Penney stores nationwide also offer consumers the capability to buy something online, and have it picked up same-day in-store within four hours.
Despite the operational improvements, J.C. Penney is fully aware that they won't mean much if it's not out there being ultra competitive on price in weekly circulars. "I think we are coming to the market with an exceptional value, and we understand our place in this market is a value retailer," explained J.C. Penney Executive Vice President of Stores Joe McFarland in an interview with TheStreet. "When you look at our advertising this year, it's a different message compared to last year -- it's more focused on value," says McFarland, a veteran retail executive who joined the company in January after working alongside CEO Marvin Ellison during their stints at home improvement retailer Home Depot (HD) .
For instance, J.C. Penney's Black Friday circular is highlighting bathroom towels for $2.99 and a $293 washing machine. Last year, J.C. Penney didn't sell appliances, but this year they have washers, dryers, dishwashers and refrigerators in over 500 stores.
Tons of shoppers lined up for J.C. Penney's early Thanksgiving opening last year
Unlike last holiday season, J.C. Penney will now have appliances to offer their consumers
What J.C. Penney is hoping is that a steady drumbeat of deals for shoppers throughout the holidays and vastly improved operations will lead to a bounce-back quarter after a mixed fall.
Despite competitors such as Kohl's (KSS) and Macy's showing improved sales trends in apparel during the quarter vs. earlier in the year, J.C. Penney wasn't so lucky. Their third-quarter same-store sales fell 0.8% compared to estimates for a 2.7% increase, in large part due to weakness in apparel.
Ellison told analysts on a conference call that apparel sales were down in women's, men's and kids categories.
"We aren't pleased with the results in apparel," he said, quick to highlight the impact of the warm fall weather. But Sephora cosmetics shops and home goods did well.
As a result of sluggish sales in the quarter, J.C. Penney took a more cautious stance with its outlook for the remainder of the year. Same-store sales are now expected to rise 1% to 2%, compared to prior projections for a 3% to 4% increase. Gross profit margin is now expected to be unchanged on the year, revised from an estimated improvement of 10 to 30 basis points.
The mixed quarter and revised outlook hasn't sent J.C. Penney's investors heading for the hills, likely as the company said sales trends improved in October on the back of its new appliance business. In fact, Wall Street seems outright giddy over J.C. Penney's potential to win the holidays for the second straight season -- shares have tacked on about 13% over the past month, out-performing the S&P 500's 2.3% gain.
And based on that October momentum, a well thought out holiday season attack plan and relative health of the U.S. consumer, J.C. Penney could once again be in a prime position to share some upbeat fourth quarter earnings when they report in February 2017.
Added McFarland, "I can go on and on with reasons why I think we will win."