J.C. Penney‘s investments in beauty aim to steer the company out of a sales slump, as it lags some of its other department store peers heading into 2018.
The company just last month revealed its plans to hire 6,500 stylists for a burgeoning hair salon business across the U.S. Its make-up sales have blossomed due to a unique partnership with Sephora. And a recent overhaul to Penney’s jewelry displays in stores is luring more women in to buy diamonds for weddings and other special occasions.
“Beauty” for Penney consists of fine jewelry, its hair salons and Sephora shops. Those three categories were key to its roughly 2 percent same-store sales growth during the holiday quarter.
“One of the key components of our strategy will always be our best-in-class partnership with Sephora,” CEO Marvin Ellison said Friday on a call with analysts and investors, after the company issued a bleaker forecast for the current year.
“Our jewelry business is bringing in a newer and younger customer to J.C. Penney and we have aggressive plans for 2018,” Ellison added. “And as a reminder, our salon customers visit a store to shop twice as often as non-salon customer.”
While Penney’s fourth-quarter results were largely disappointing, with shares ending Friday down more than 5 percent, the company said its fine jewelry, hair salon and Sephora businesses all saw comps above the company average during the holiday period.
Penney “is focused on increasing revenue per customer though beauty,” Cowen & Co. retail analyst Oliver Chen said. “Bold changes [are] beginning to resonate with customers” across the Plano, Texas-based retailers’ roughly 875 stores.
Today, Penney has a Sephora shop situated in roughly 642 of its stores, with plans to add 27 additional Sephora stores in 2018. Its hair salons, which are branded as “The Salon by InStyle,” are in about 750 stores currently. (InStyle is a women’s fashion magazine with which Penney partnered in 2015 to make its hair salons more distinct and recognizable by name.)
“Department stores used to do a lot of these businesses,” Natalie Lockhart, the vice president of Penney’s salon business, told CNBC. “You could get lunch … and do all these things within the building.”
Lockhart said Penney’s salon customer visits the department store about nine times every year, and during those trips she will venture into other areas of the store. The company’s goal in 2018 is to attract the remainder of Penney’s customers who frequent its stores but don’t currently use the salons, she explained.
“These departments [within Penney] are high touch and experiential, even in a way a traditional beauty offering is not,” she said. Sephora, for example, is giving shoppers makeovers with exclusive brands, such as Fenty Beauty by Rihanna. Penney’s hair salons are holding educational events (i.e., how to tie the perfect pony tail), while the department store chain’s jewelry counters have become a one-stop shop for brides to be.
“The statistics say, if you have a good experience with your engagement ring, you will stay at that store and buy 90 percent of your other purchases there,” said Pam Mortensen, the senior vice president of merchandising for Penney’s jewelry business.
“The fine jewelry customer is a very loyal customer,” Mortensen added. “They actually cross-shop more than any other department.”
That shopping pattern is exactly what Penney aims to take advantage of — to get shoppers in the door for a facial or hair treatment, and then lure her to buy items for her home or for her kids while she’s there.
Macy’s, Nordstrom and Saks owner Hudson’s Bay have each made strides in opening spas, nail salons and the like in some of their more premium stores, but none have made as big a push as Penney with those services to date.
“J.C. Penney is the only retailer that can offer a combination of Sephora, salons and fine jewelry under the same roof, and this unique beauty experience cannot be replicated online and magnifies the importance and relevance of our physical stores,” Ellison told analysts and investors.
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