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The Penney Dividend

RR JCP JC PennyThere’s a billion dollars of home business missing; anybody have a clue where it went?

One thing is clear: Over the past 12 months, the new JC Penney/The Penney Co./JCP/Whatever has lost about $1 billion in home furnishings sales as it transforms itself into…well, into what it’s not.

Quantum mathematics was never my specialty, but a rough crunching of the numbers shows JCP overall sales off about 24% for the past four quarters since Ron Johnson came to town, and if you figure about a quarter of the retailer’s business is in home, that works out to a drop of about an even billion. That’s a pretty fair square amount.

So, where did it go? While the tendency might be to round up the usual suspects and dole it out accordingly, the fundamental things don’t seem to apply in this case. Certainly, the big winner has been Macy’s. Often located at the other end of the big bad mall from JCP, it has been the beneficiary of a department store diaspora the likes of which we haven’t seen in quite some time. All of the coupon-clipping, one-day-sale-tripping tired-and-poor are parking their cars near the big red star and buying up a storm. Macy’s is clearly enjoying a big home run.

There are two other big winners. One is Bed Bath & Beyond, which also knows a thing or three about coupons and has the merchandising might to satisfy even the most budget-conscious shopper. BBB’s comps have been running generally better than average recently (not without a speed bump or two) and that is clearly the old Penney customer helping to do the trick. The other big winner is the TJX group of companies, particularly Home Goods. Month after month Marmax units put up strong numbers, and while some of that is coming out of traditional discounters, it is also the fallout from Penney’s that is driving some of that.

By the way, we’re just not talking in-store winners here either. Sources say 40% or 50% of the old Penney online business came from home, and with web sales tanking even more than in the stores, you’ve got to know that Macys.com, Bed Bath online, and even Amazon have been the recipients of that business.

Those are the winners.

The losers? Well, it’s not necessarily who you would expect. The Kohl’s Kollapse (despite a better if not particularly meaningful January) is stunning considering the loss of business at Penney. Kohl’s should be the most natural place a disgruntled JCP shopper should go to, but it’s not happening.

The same thing is happening at Target, the other place you’d logically expect to be prospering.

So, what’s the reason? It turns out it’s the same thing at both retailers: uninspired, insular merchandising strategies that just aren’t exciting the home customer. Shame on both of these stores for not employing some serious carpe diem doings. But here’s the big thing about that missing billion dollars in home furnishings sales: at least some of it – and probably more than anybody wants to admit – has just disappeared. It’s a well-known, if little-understood phenomenon, that when stores promote heavily, they create business that wouldn’t have happened otherwise. Without Penney out there doing its 532 promotions last year, there were 532 fewer reasons for people to buy things.

The same thing happened when Linens ’n Things went out of business a few years back. Sure, Bed Bath got a big chunk of those sales and some went to Target and Kohl’s too, but a big piece of it simply went away. Again it was a case of one less retailer out there promoting. So, this time around some retailers are cashing in their Penney dividends. Others are not so lucky. And some of those dividend checks are just…well, lost in the mall.

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