Did Penney announce its appliance rollout to change the discussion?

Discussion
May 10, 2016

This column is a speculative exercise.

In today’s 24/7 cable news and social media world, it’s become imperative that organizations — from political campaigns to businesses — are ready to respond to and/or move the media away from the latest story in a cycle. That’s what makes the timing of J.C. Penney’s announcement that it will expand sales of major kitchen and laundry appliances to nearly 500 stores and jcp.com so interesting.

Those following the department store chain know that press coverage has been largely positive. Penney is one of the few in its channel, for example, to post positive year-over-year same-store sales during the fourth quarter holiday season. But last Thursday night (9:46 p.m. ET), the New York Post broke a story that Penney took “drastic cost-cutting steps in an attempt to protect its bottom line” in mid-April after experiencing sales that were below the company’s expectations.

Reactions to the Post report caused Penney’s stock to fall Friday morning. So, with this negative story out there, what did Penney do? Kept quiet until Monday and then announced that the pilot appliance program the company ran in 22 stores in San Antonio, San Diego and Tampa was a success. Such a success, in fact, that Penney was announcing the news ahead of its next earnings report on Friday of this week.

Penney’s press release said the company would begin the rollout of appliances to other stores in early July and complete it in the fall.

“The pilot confirmed that we should not limit our business to apparel and soft home in order to achieve significant revenue growth,” said Marvin Ellison, Penney’s CEO, in a press release. “Additionally, we are pleased with our EBITDA performance in the first quarter, and remain on track in reaching our 2016 EBITDA objectives.”

The second portion of Mr. Ellison’s statement was unrelated to appliance announcement, yet partially addressed the Post report without getting into details. It will be interesting to see what Penney reports on its next earnings call and how company executives respond to analysts’ questions.

DISCUSSION QUESTIONS:
Do you think J.C. Penney used its appliance announcement to change the topic from sales issues in April to something more positive? How adept are most retailers in responding to negative news in ways that help give them control over their own narrative?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I’m more surprised that Penney allowed the layoff information to slip mid-week than anything."
"If J.C. Penney moved up its announcement about major appliances to counteract a speculative "news story," they are giving the New York Post more credit than it perhaps deserves."
"No. Geez, do we always have to wonder if there is some secretive plot?"

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10 Comments on "Did Penney announce its appliance rollout to change the discussion?"


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Paula Rosenblum
Guest
6 years 16 days ago

Most retailers (actually most public companies) tend to release bad news on Fridays, ideally right before close of the markets. That’s also when they tend to do layoffs. It’s considered less disruptive.

So I’m more surprised that Penney allowed the layoff information to slip mid-week than anything. Someone leaked some info, and that person will hopefully be let go.

Now, having said all of that, I think it’s a decent move to bring in appliances. I think everyone is waiting for the final Sears shoe to drop, and Penney could pick up some new customers that way. Apparel is a tough business right now, and it’s not a bad idea to hedge their bets.

Max Goldberg
Guest
6 years 16 days ago

Regardless of why Penney made the announcement, why would it want to get into a pure commodity business that is filled with low-price competitors? All companies experience up and down quarters. Rather than manage quarter by quarter, retailers should take a longer-term view, which will be better for management and investors. This would be a good time to follow Amazon’s lead.

Dick Seesel
Guest
6 years 16 days ago

If J.C. Penney moved up its announcement about major appliances to counteract a speculative “news story,” they are giving the New York Post more credit than it perhaps deserves. I take it as a positive that the test program is working, and that Penney is moving fast under Marvin Ellison’s leadership. As to “why appliances?” — the collapse of Sears represents low-hanging fruit for J.C. Penney, which has space to burn in its home store.

And a side comment: The Penney store at the Florida Mall in Orlando last Sunday evening was well-stocked, well-maintained and very busy. It’s a small sample size (and a new quarter) but Wall Street should hold its fire for an actual earnings release, not tabloid rumor-mongering.

Jan Kniffen
Guest
Jan Kniffen
6 years 16 days ago

I think J.C. Penney merely took the opportunity presented by the appliance announcement to say “things are OK.” Regarding the appliance strategy, Marvin Ellison (CEO) understands the business. It is a business that J.C. Penney and all department stores were in once upon a time. And it is not like appliances are taking up space that could be put to a better and higher use. J.C. Penney has plenty of space. As long as they manage the appliance business carefully, it should be marginally additive to traffic and to sales, and as Sears melts it will only get better.

Tom Redd
Guest
6 years 16 days ago

No. Geez, do we always have to wonder if there is some secretive plot? J.C. Penney is expanding their assortment in test areas to bring in more shoppers and to be more one-stop for shoppers, like the old days. Appliances make sense, especially as the new shoppers: Millennials, etc., need places that can help them understand what appliances do … and which ones are most hip.

Brian Kelly
Guest
6 years 16 days ago

Stock analysts are a pretty focused bunch and appliances will not dissuade them from boring into J.C. Penney earnings issues. In fact, appliances no longer throw off cash like the old Sears benefit bundle of product + insurance + delivery + service + proprietary credit. So analysts might ask why white goods if EBITDA is dicey.

Nowadays, a Friday release no longer slides to Saturday papers. Once released, the news is actionable. There are some end-of-day Friday or Saturday releases, but most have more sophisticated IR resources than dodging the inevitable. It’s best to lead one’s own parade. Just keep the elephant sweepers close at hand.

Or as we like to say, “retail ain’t for sissies!”

Kai Clarke
Guest
6 years 16 days ago

This is clearly an example of using appliance announcements to better focus its news on positive things, rather than any issues. JCP is doing a better job, because we think this, and we are guided to believe this perception based upon their focus with their PR. That is what good PR is for.

Gordon Arnold
Guest
6 years 15 days ago

Store closings and variable costs will crush profit and more importantly, cash flow, when an unexpected dip in sales occurs in an economic depression like the one we are in. Loading all of the stores with high-priced inventory, with their profit taking floor plans, and invisible associates is not less than high risk. It didn’t help ailing performers for Sears and Kmart, so it most likely won’t work for them.

Mr. Ellison is going to get a good lesson in what he doesn’t know about the buying power and distribution capabilities of Lowe’s and Home Depot, who will not sit idle for this new comer.

Mike B
Guest
Mike B
6 years 15 days ago

I hate to be the only negative response, but I think they announced this to distract from the bad news that leaked out last week. Adding appliances will help their top line in the year the appliances are added but as other have pointed out, the help to the bottom line may not be so noticeable.

It is a fine PR move to kick the can down the road a bit more. It won’t help the forthcoming demise of this chain but it may prolong its life.

I agree with others who say they should put more efforts into online; that would actually help them have a future….

Kim Garretson
Guest
Kim Garretson
6 years 13 days ago

In addition to Ellison understanding the appliance business, Mike Amend is there now from Home Depot running omni-channel transformation, and of course THD is a great competitor in this segment. I expect Amend will be a key player in the rollout. The Web site is already nicely done around major appliances.

wpDiscuz
Braintrust
"I’m more surprised that Penney allowed the layoff information to slip mid-week than anything."
"If J.C. Penney moved up its announcement about major appliances to counteract a speculative "news story," they are giving the New York Post more credit than it perhaps deserves."
"No. Geez, do we always have to wonder if there is some secretive plot?"

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