J.C. Penney CEO Warns Sears: We're Coming for Your Appliance Business

J.C. Penney (JCP, -0.14%) CEO Marvin Ellison makes no bones about it: the retailer is going hard after fellow struggling department store chain Sears’ (SHLD, -4.65%) appliance sales.

Penney, which resumed selling large home appliances two years ago after three decades away from the category, saw comparable appliance sales rise 30% in the November and December holiday period, a significant contributor to Penney’s better-than-expected 3.4% holiday season sales growth, Ellison told Fortune in an interview on Thursday. What’s more, Penney will be ready whatever happens to Sears, a retailer that has closed hundreds of stores in recent years, and even recognized doubts about its longer-term viability in its annual report last year. Sears Holdings, which also operates Kmart, said on Thursday it was closing another 64 Kmart stores and 39 Sears stores, on top of many previous rounds of store shutterings in recent years.

In addition to appliances such as refrigerators and washing machines, Penney last year added showrooms for and mattresses at some 500 stores in its efforts to become less reliant on apparel, bolster its home goods category, and frankly, to capitalize on the years-long sales decline at Sears, once the leading seller of appliances in the United States.

“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 said. Sears did not report holiday season sales, but in the third quarter, its namesake chain’s comparable sales fell 17%. Last year, Sears announced it would start selling selling its line of Kenmore appliances on Amazon

“Our appliance initiative, our furniture, our mattress is a way to plant a flag now in the expectation we’ll be able to gain more share in the near future,” he continued.

But as Sears (whose sister chain Kmart has also closed enormous numbers of stores) exits many malls, it follows that traffic to such centers would slip and inflict collateral damage on competitors like Penney and Macy’s. (M, -3.40%) Not so, Ellison says, claiming that many Sears stores generate such low shopper traffic anyway. Whatever becomes of Sears, Ellison, says, Penney is ready and knows which locations could be at risk.

“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,” Ellison says. “We’re not going to be caught off guard.”

Still, appliances are a small part of Penney’s business and not yet big enough to move the needle. So Penney has been focusing on its e-commerce. Ellison said Penney’s website offered 70% more items this holiday season than last and that each Penney store contributed to supporting its e-commerce. That is all the more crucial given that Penney closed 138 stores last year, leaving it with 875 locations. Ellison said Penney has managed to hold onto to most online sales in zip codes where it closed a store.

And Penney is looking to take advantage of another retail giant’s travails: Toys R Us, the behemoth that filed for bankruptcy last year. Penney increased its assortment for the holidays by 40% and is making its toy boutiques a permanent fixture in its stores, beyond the holidays.