How J.C. Penney could benefit, struggle from Sears’ Amazon partnership

With its partnership to sell Kenmore appliances on Amazon, Sears Holding Corp. hopes to rival other hard good retailers like J.C. Penney Co. Inc. (NYSE: JCP). But both companies stand to fight for more than appliance sales as they go head-to-head over hard goods.

Sears (Nasdaq: SHLD) announced July 20 an agreement to sell its Kenmore line on as the company struggles to bring customers into stores, and as its Canadian arm has gone into default.

The Kenmore name is more than a century old, and one of the country’s most iconic appliance brands. While selling the products on Amazon means Sears loses its exclusivity with Kenmore, the move may help bring much-needed revenue to the department store.

“The launch of Kenmore products on will significantly expand the distribution and availability of the Kenmore brand in the U.S.,” Sears CEO Eddie Lampert said in a prepared statement about the partnership.

Stocks of other appliance retailers stumbled the day of the Sears/Amazon announcement. Home Depot’s shares took a 4.5 percent hit, while Lowe’s Cos. Inc. declined 5.9 percent. Best Buy decreased 4.2 percent.

In comparison, shares of Sears were up 13 percent on the news.

J.C. Penney saw a much smaller impact, with its shares decreasing less than 1 percent. But the announcement has more ramifications for the Plano retailer than its stock price.

In January 2016, J.C. Penney began re-introducing appliances into its brick and mortar stores after a more than 30-year hiatus from the sales category. Since then, the company has introduced the products online and said it plans to roll out appliance showrooms to 600 stores by the end of 2017.

J.C. Penney declined to comment on how its appliance business is faring so far and does not separate appliance sales from overall revenue. In its first quarter 2017 earnings, reported May 12, the company said improvements in several departments, including appliances “ provide us with the confidence to maintain our sales guidance for the full year.”

The company’s second quarter earnings will be reported on Friday before market open.

While J.C. Penney has competed with Sears for appliance dollars since introducing the products, Sears’ Amazon partnership gives the rival company a larger platform to market its goods.

“That deal gives Sears the opportunity to remain somewhat relevant in a space where they have been completely marginalized otherwise,” said Jason Moser, an analyst with Million Dollar Portfolio at The Motley Fool. “This deal keeps Sears somewhat current, at least in the consumer’s eyes, which is a plus.”

To keep up, analysts say J.C. Penney must continue pushing its own e-commerce efforts.

And to differentiate itself, the retailer should continue improving its home department, which has been expanded to include Ashley Furniture; pilots of Empire Flooring and Trane heating, ventilation and air conditioning services; bathroom remodeling; quick-ship and installed blinds; home water solutions; awnings and smart home technology.

It also offers washers, dryers, refrigerators and microwaves to commercial and residential property groups.

“I think they can leverage their strength in home with window treatments and other things to create a back-to-front home design service that includes not only treatments and decor, but appliances and smart home features,” added Ed Fox, associate professor of marketing at the W.R. and Judy Howell director of the J.C. Penney Center for Retail Excellence at Southern Methodist University.

However, pushing appliances may hurt Sears and J.C. Penney in areas that both have been pushing to improve – in-store traffic and comparable sales. Because consumers buy appliances infrequently and usually have them delivered, they have little incentive to visit brick and mortar stores. And offering appliances online further reduces the need for a store visit.

In its first quarter earnings, J.C. Penney saw a 3.5 percent decrease in same-store sales, while Sears, which reported first quarter earnings on May 25, saw a roughly 12 percent dip.

“While they have a high-dollar value don’t bring people in stores frequently,” Fox said. “Now people can get competitive products rather than walking into a store.”

The good news for J.C. Penney is that while it continues to work on appliances other initiatives to return to profitability, analysts are unsure Sears will be able to battle store closures and lagging profits to stay in business.

“It’s becoming apparent that Sears is in what’s becoming a death spiral,” Fox said in January. “J.C. Penney will be around in three to five years, and Sears may very well not.”

That means while J.C. Penney might currently be losing customers now to the Sears/Amazon partnership, it could pick up those clients again in the case of a Sears bankruptcy.

“The core customers for the apparel and home businesses at Sears and J.C. Penney were quite similar,” Steve Dennis, president of retail strategy firm SageBerry Consulting, said earlier this year. “They were pretty price sensitive with fairly constrained incomes.”


Sears is adding Alexa support to its Kenmore smart home appliances

Amazon’s Alexa assistant is now able to control an even wider range of home appliances. Smart appliances from Sears and its Kenmore brand are joining the list of hardware that can be used through voice commands to Amazon’s Echo lineup of speakers and other Alexa-enabled devices. GE and Whirlpool have already integrated similar support across their respective products, and now “the full line of Kenmore smart appliances” — air conditioners, refrigerators, and more — can be controlled with a new Alexa skill, Kenmore Smart.

Owners of connected Kenmore products can say commands like “Alexa, tell Kenmore Smart to set my air conditioner to 70 degrees” to make adjustments without having to walk over and do it the old fashioned way: with buttons. Or with the remote that came with your air condition that always gets misplaced.

Amazon will also begin selling Sears’ Kenmore products directly, which is a significant bit of good news (and a new sales channel) for the struggling department store chain. The company has acknowledged “substantial doubt” about its future prospects, according toBloomberg, after years of losses brought on by its flailing attempts to compete with retail competition — including Amazon’s giant e-commerce presence.


Sears just opened a store that only sells mattresses and appliances

A handout photo inside the Sears Appliances and Mattress store in Pharr, Texas.

Source: Sears Holdings
A handout photo inside the Sears Appliances and Mattress store in Pharr, Texas.

Sears is trying something new.

The department store chain announced on Thursday it opened its first Sears-branded appliance and mattress store in Pharr, Texas.

Word of the new store comes the same day reports surfaced that Sears is planning to close an additional 20 Sears and Kmart locations across the U.S. That’s on top of the more than 200 stores it’s already slated to close this year.

This first-of-its-kind store for Sears showcases appliance brand Kenmore, and mattresses from Tempur-Pedic, Beautyrest, Sealy and Serta, among other well-known labels, the retailer said.

Plans are also underway to open additional freestanding Sears stores dedicated to these two categories — what Sears is calling “two of its strongest.” Dating back to the department store chain’s early days, appliances have always been a part of Sears’ so-called bread and butter.

The Texas store’s manager, Albert Silva, told CNBC his store is about 20,000 square feet with 22 employees so far, and he plans to hire more. At Thursday’s ribbon cutting, Silva said he saw a supportive showing from the local community, with many people excited about the brand’s return to Pharr.

Back in 2015, Sears closed a full-line store a few miles down the road. Many shoppers had grown to rely on Sears for household items, so the chain’s return — now in a slightly different format — is promising, Silva added.

Pharr is also situated about three miles from Mexico, so international “border business” should really help Sears’ new store thrive, the manager said.

Notably, even though this store is branded as only selling mattresses and appliances, Sears said, shoppers can order any item from the company’s website and pick it up at the new Texas store without paying any shipping fees.

“Our members tell us they want an integrated and seamless shopping experience,” the company said in a statement. “They want to shop on their own terms — which means sometimes shopping online, sometimes visiting a store and sometimes a combination of both.”

Last year, Sears introduced a similar new store concept in Fort Collins, Colorado, selling only appliances. This latest launch in Texas is a bid to replicate the success Sears has seen in Colorado, the retailer said, adding the Colorado store has “surpassed projections since its opening.”

Silva said he’s only been working at Sears for three months but is excited about the growth potential of the new store concept. “We are trailblazers of what the future is.”

It’s a rare spot of optimism for the troubled retailer, which warned earlier this year that there were doubts about its ability to continue as a going concern.

In order to fend off a possible bankruptcy, Sears has been closing hundreds of underperforming locations, conserving cash as its sales shrink.

While this smaller-format store may be a less expensive way to continue to keep the Sears brand in front of consumers, it will be difficult to expand this strategy widely given the retailer’s heavy debt load.

“In some ways [this store] makes sense,” GlobalData Retail’s Managing Director Neil Saunders told CNBC. “Sears is best known for appliances and mattresses, and that’s where its strengths still lie. A stand-alone store in the right location is more likely to attract customers. … The format looks good and incorporates technologies and services that customers will value.”

The biggest issue, though, is that this is a “drop in the ocean” compared to the wider problems at Sears, Saunders said.

The landscape remains competitive, and more and more home-improvement companies want a share of the appliance category, he added. “Sears has its work cut out to compete.