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JC Penney Tries to Get Its House in Order

Shoppers in JCPenney
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Shoppers in JCPenney

Home is where the heart is, but for JC Penney, it also better be where the sales are.

In its 14th month of a multiyear transformation plan, the retailer today soft-launches some of its home shops—in-store boutiques for furnishings from designers such as Jonathan Adler and Michael Graves. Some of the merchandise has been available on the JC Penney website for several weeks, but the big reveal will be in early May, when the in-store shops are completed. (The goal is to have the boutiques in 500 of the 1,100 department stores by the end of May.)

The home launch is one that CEO Ron Johnson has referred to as "pivotal" to the company's transformation. With its JC Penney shares down 62 percent since the turnaround was announced, the home shops will be carefully watched by Wall Street.

"JC Penney is finally beginning to turn, starting in mid-March, with first sustained increase in traffic—their most critical issue—in the Ron Johnson reign," said Craig Johnson, president of Customer Growth Partners.

He cites better products, $10 coupons, and improved price-focused signage and advertising as reasons for the increase in traffic.

Home goods has been JC Penney's worst-performing category for seven years, accounting for only 12 percent of its sales in fiscal 2012, compared with 21 percent in 2006. It certainly didn't help that total store traffic dropped 13 percent last year—the first of the makeover—with revenues plunging 25 percent.

JC Penney tells CNBC that "several hundred stores" will see soft launches of designer shops that include Jonathan Adler, Michael Graves, Bodum and Conran in its revamped offering by next week. (Snowstorms in the Northeast disrupted construction for some shops in that region, delaying the soft openings by a couple of days.)

Macy's, JC Penney and Martha Stewart Living Omnimedia remain embattled in lawsuits over certain home-goods product categories, but nondisputed items, such as window treatments and greeting cards, will be available in JC Penney in a line called MarthaCelebrations.

Former JC Penney CEO Allen Questrom has been a strong critic of Johnson's strategy but may be starting to change his opinion. Questrom spoke to CNBC's Scott Wapner today, saying that had taken a tour with Johnson last week of the JC Penney prototype in Texas. Though saying he still thinks the approach is a big gamble, he hopes it works.

On March 6, Questrom called into CNBC's Fast Money Halftime Report saying, "The [JC Penney] board has to take action. They can't be delusional like Ron Johnson is."

When Questrom spoke to Wapner today, he said Johnson was delightful and energetic during the tour.

Wall Street is waiting to see if the home shops are the key for JC Penney to get its house in order.

By CNBC's Courtney Reagan; Follow her on Twitter @CourtReagan

Questions? Comments? Email us at consumernation@cnbc.com.

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