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In an attempt to revive sales, J.C. Penney is focused on growing one category that many retailers are seen fleeing today: apparel.
Penney's that same-store sales in its apparel business underperformed during the second quarter, largely because of a "tough" environment for kid's clothing. But Penney's is forging ahead in rolling out a better and broader assortment of clothing, specifically for women.
"We continue to improve and strategically adjust our apparel categories with an emphasis on fixing our women's apparel business," Penney's CEO Marvin Ellison said on a call with analysts and investors.
"In the past, J.C. Penney has been over-assorted in traditional women's clothing and under-assorted in casual and contemporary women's clothing. … The first step in converting women's apparel to a more casual environment was to increase our penetration in activewear."
Penney's hopes to accomplish this by expanding key relationships with outside partners and Adidas, while also beefing up its own athleisure-focused label, Xersion.
Many are saying this move is a long time coming for Penney's.
"There is an endemic and stubborn weakness in [Penney's] core women's assortment," Craig Johnson, president of Customer Growth Partners, told CNBC in an interview. "At some of the other places like Nordstrom and Macy's, women's is still an issue, but they have been addressing it. "
At Penney's, though, management hasn't given the category as much of a "boost" as it needs, he said.
Becoming a fashion destination
Though department stores have branched out to sell other big-ticket items like home furnishings and appliances, apparel remains a crucial part of their overall offering and a way to draw people to stores. In fact, 75 percent of a department store should be devoted to women's apparel and accessories, Johnson said.
"J.C. Penney is mainly a fashion destination, but fashion is not about fabric, it's about newness. They have to bring something new into the mix."
In the second quarter, Penney's liquidated 127 of the 138 full-line stores that are scheduled to close, something the company said allowed for "less desirable apparel inventory to make room for ... more casual and contemporary women's apparel being launched for back-to-school and the fall season."
J.C. Penney's next step within apparel, as it was laid out on Friday's earnings conference call, is to offer female shoppers a "trend-right contemporary" line that is suitable for a "busy lifestyle."
Some of this includes signing exclusive partnerships with other big brands. For example, Penney's has partnered with footwear designer Libby Edelman to bring an exclusive collection of apparel, contemporary shoes, handbags and accessories to its stores and online.
Earlier this summer, Penney's launched a brand inspired by the TV show "Project Runway." J.C. Penney will be the exclusive retail partner for "Project Runway," something the department store hopes will entice younger shoppers, who are more familiar with the show, to shop the line.
Penney's has also pointed to success with private labels, City Streets being one of them.
"City Streets will offer our customers an everyday low price that is contemporary, trend-right and at a low price," the company said of the label. The less expensive line features $7 polo shirts, a $15 pair of jeans and women's booties for $22.
Nordstrom setting an example
Nordstrom is a good example of a company that has found success with private labels within apparel — which was a point highlighted on its latest earnings call. Beauty and women's apparel pushed the upscale department store's sales higher in the latest quarter, and three of Nordstrom's proprietary labels were among its top five selling brands, the company said.
Nordstrom added that its active apparel business was "very good," having "been that way for a while."
"I think that's just ... how people shop," Co-president Peter Nordstrom said on a call with analysts and investors. "The casualization of America and how active is really a driving force in fashion and trend ... that's been really good."
Over time, Nordstrom said it's still looking for ways to distinguish itself and its apparel offering.
"It's important that we have strong brands, but the brands aren't here to save us," Peter Nordstrom said. The plan is to increase private-label penetration, but it takes time, he added.
In a sense, Penney's is following in Nordstrom's footsteps and hoping to emulate the retailer's success. After a week of mixed department store earnings, Nordstrom was the only name to deliver same-store sales growth.
But one can't help but wonder why Penney's is only now making such a big push in apparel, when other retailers in that same business are fighting to stay alive. Brands like J Crew and Nine West are on so-called bankruptcy watch, while clothing retailers Gymboree, BCBG, Wet Seal and Rue21 have already been forced to file.
"It is very late in the game, and it is the most difficult part of the retail market," GlobalData Retail managing director Neil Saunders told CNBC in an interview.
"They are going to have to work incredibly hard to make it work and to be different."
But apparel is also something of a necessity for a department store, Saunders noted, hence why Penney's hopes to return to profitability by growing this part of its business. There are better margins to be made in apparel, and it should cover a large portion of Penney's floor space, Saunders added.
Penney's investing in creating more of its own brands is one way for the company to separate itself from the rest of pack and have a unique factor. But not everyone is sold on the idea that the chain will be successful. And these efforts take time, which is clearly of the essence.
"I have my doubts," Saunders said about the apparel push. "Even established brands like Gap and J Crew ... are struggling." Considering today's retail environment, department stores partnering with already established brands is 9 times out of 10 the safer and faster bet, he added.
Meantime, Penney's is forging ahead and has said it will launch more apparel lines in September.
"One of the key reasons why this business has been under so much pressure at J.C. Penney is because we were slow to react to the changing trends and how women dress and what they're looking for," CEO Ellison said on Friday's call.
"So we're de-emphasizing or reducing ... penetration of more traditional clothing and will be more aggressive in going after more casual and contemporary."
Next week, big-box retailers Target and Wal-Mart, which have made their own pushes in apparel in different ways, are set to report earnings, along with off-price names TJX and Ross. Apparel retailers Gap and Urban Outfitters, among others, are also scheduled to deliver quarterly results.
Correction: In the second quarter, J.C. Penney liquidated 127 of the 138 full-line stores that are scheduled to close. An earlier version misstated the number of stores closed.