Kicking Wicker to the Curb

Too bad Pier 1. Analysts say Penney’s hit a home run with Martha Stewart wannabe Chris Madden.

By Parija Bhatnagar, CNN/Money
from CNN/Money — August 10th, 2005

NEW YORK – Difficult weather, challenging sales comparisons, wrong merchandise, poor advertising, low customer traffic.

J.C. Penney expanded the Chris Madden home furnishings line after calling it a hit with consumers.

Just in case Pier 1 runs out of excuses to blame for its dismal sales for the past 15 months, here’s one freebie from analysts: “Martha Stewart wannabe Chris Madden ate our lunch.”

Chris Madden is the home furnishings designer hyped by many in the industry as the next Martha Stewart.

J.C. Penney didn’t necessarily pitch her to the world in those terms, although the mid-priced department store chain did hope for a multi-million dollar sales bounce when it recruited Madden last May to design a new collection of home furnishings.

Industry watchers said Penney’s gamble with Madden may have worked, possibly at the expense of Pier 1.

“Penney made a very concerted effort to improve the home business and overcome its stodgy image,” said Kim Picciola, analyst with Morningstar. “It’s definitely gained market share in that area while Pier 1’s been losing market share.”

Pier 1 continues to struggle with its turnaround efforts, UBS analyst Brian Nagel, wrote in a recent research note.

“Our fieldwork suggests Pier 1 is adjusting its product mix to include more larger ticket furniture items,” Nagel said.”In the near-term, this should help to lift its comparable sales. Over the longer-term, however, it could undermine the potential for margin recovery at the company and further distance it from its most loyal customers.”

In Penney’s case, Picciola argued that the Chris Madden collection has helped spruce up its home offerings, giving the retailer “much-needed credibility, especially with the younger, trend-conscious consumers.”

Home furnishings, along with apparel and shoes, is now one of the top-three performing categories for Penney, based on quarterly sales growth.

Howard Davidowitz, retail analyst and president of New York-based retail consultancy and investment banking firm Davidowitz & Associates, agreed with Picciola that Penney’s got a home run with Madden.

“I’ve heard that the Chris Madden line’s pulling powerful comparable sales growth for the past six to seven months. This is a category that exploding for Penney and it’s also helping boost their monthly sales higher,” Davidowitz said.

Penney declined to disclose actual same-store sales numbers although the retailer did confirm that its home furnishings business has been “quite successful.”

Home sweet home for some, sour for others

That’s not quite the case with other home furnishing chains like Pier 1 Imports, Linens ‘n Things and Bombay Company.

Linens ‘n Things  sales at stores open at least a year — a key retail performance metric — fell 6.7 percent in its second quarter while Bombay Company posted a meager 1 percent increase in same-store sales for its second quarter.

A government report on July sales showed a 2.3 percent increase in sales of furniture and home furnishings for all retailers versus a three percent increase the prior month.

So if consumers are still in the mood to decorate, why are these other chains flailing where Penney’s succeeding?

In an interview with CNN/Money, Madden listed durability, affordability and style as key attributes that she focuses on while designing her collection.

“Penney customers are aspirational customers,” said Madden. “Not everyone has the kind of disposable income to spend on the most expensive furniture or towels or bedding. Nevertheless they would buy something that is of good quality at a good price and it looks beautiful.”