Penney’s CEO: We’re Taking Sears’ Home Business

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While holiday sales bested predictions overall, one category in particular saw great gains: Home.

Mastercard SpendingPulse showed electronics and appliances, specifically, increased by 7.5% between Nov. 1 and Dec. 24—growth not seen in a decade.

For retailers catering to this segment, that spells big opportunity. And J.C. Penney CEO Marvin Ellison is positioning his department store to scoop up these sales—stealing them from one player in particular.

“We’re going after Sears and we’re going after market share that we think is going to be available not only now but as they continue to contract,” Ellison told Fortune last week.

At one time, Sears would have been almost impossible to beat in a contest for Americans’ apparent nesting instincts. It was the go-to for everything home related from appliances to furniture. Today, however, the retailer isn’t top of mind for much any more.

Sears continued its slow decline throughout 2017 with losses only stemmed by a series of loans from CEO Edward Lampert’s ESL Investments hedge fund and the monetization of the chain’s cache of real estate and brand assets. Though Sears Holdings has not reported holiday sales numbers, comp sales for the third quarter fell by 17 percent at Sears and 13 percent at Kmart.

[See a timeline of Sears’ 2017 performance: Infographic: Defying Doubts, A Diminished Sears Dodges Bankruptcy Throughout 2017]

In March, the company said it would consider selling the Kenmore appliance brand. Then in July it announced it would sell those products on Amazon. While Sears positioned it as a way to reach new, younger consumers, the upside for revenue might be yet another downside for the physical stores since the deal could disassociate the Kenmore name from Sears, giving consumers one less reason to consider shopping at the department store.

Additionally, Sears sold the Craftsman tool brand to Stanley Black & Decker in January; severed its wholesale ties with Whirlpool, maker of its namesake brand, Maytag and KitchenAid appliances, in October; and is exploring third-party partnerships for its Home Services arm.

The retailer did open an appliance store in Colorado and an appliance and mattress store in Texas over the last two years. But the slow rollout coupled with the many issues the company faces, may prove to be too little as the main business continues to contract.

Last year, Sears Holdings closed nearly 400 stores, and it recently announced more than 100 more closures.

“When and if they decide to get out of the brick and mortar business we have a very clear understanding of where those locations are,” J.C. Penney’s Ellison told Fortune. “We’re not going to be caught off guard.”

To prepare, J.C. Penney is making a big push into home with 600 appliance showrooms in J.C. Penney doors and tests in home services like HVAC, bathroom remodels and blinds installation. The company says the focus on this category is a natural given that 70 percent of its customers are homeowners.

These developments haven’t gone unnoticed. Morgan Stanley noted in May that the retailer is the natural beneficiary of Sears’ woes.

In a release outlining its holiday performance, Ellison counted home as a leading category driving the chain’s 3.4% comp sale increase, along with beauty and fine jewelry.

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