JC Penney Takes a Run at Baby Market

When the last Babies “R” Us stores closed in late June following the bankruptcy filing by parent Toys “R” Us, the retail space for dedicated baby shops opened up. Less than a month later, Walmart Inc. (NYSE: WMT) announced that it had added thousands of items to its assortment of baby gear and launched a website specifically for consumers looking to buy nursery items.

At the same time, the mega-retailer said it was adding new in-store space in its baby department in 2,000 stores. Thursday morning, J.C. Penney Co. Inc. (NYSE: JCP) announced that it is adding more items to its baby department in 500 of its brick-and-mortar stores.

J.C. Penney’s senior vice president and head of merchandising, James Starke, said:

The baby care business is expected to reach over $13 billion by 2021 and we are seizing this opportunity to pursue available market share and aggressively go after the baby customer with these new shops. We’ve strategically chosen these 500 JCPenney locations because the majority of the stores are near a specialty baby retailer that has recently closed its doors.

While Walmart touted its curated collections of decor styles, J.C. Penney’s foray appears aimed at broadening its merchandise assortment to include car seats, strollers and other items in a location next to the stores’ existing assortment of baby clothes.

J.C. Penney also noted that select stores will have nursery furniture available in stock for customers to purchase and take home the same day, while customers at remaining stores can arrange to have purchases shipped directly to their homes. Coordinated collections of dressers, changing tables and gliders are available at the company’s website.

Starke also took a swipe at Walmart that focused on its online baby gear offerings:

JCPenney appreciates the importance of having a broad assortment of baby products online but we also know that there are certain items that parents – especially first-time parents – want to see in person. They want to test out the stroller, feel the crib sheets and compare bottle sizes in person. Our competition is underestimating the importance of a physical in-store baby shop and that is where JCPenney is going to differentiate.

One clear success for J.C. Penney has been its in-store Sephora beauty products shops. It seems reasonable, then, for the company to try a similar approach to baby gear. Unfortunately for J.C. Penney, this change probably is not going to turn things around.

J.C. Penney reports second-quarter results next Friday before the markets open. Analysts are expecting a loss per share of $0.05 and revenue of $2.87 billion. J.C. Penney stock traded up about 1% Thursday morning to $2.40, in a 52-week range of $2.25 to $5.04. The consensus 12-month price target on the stock is $3.35.