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JC Penney taps Lionel Richie to help with its new brand, as more retailers team with celebrities to drive sales

  • Lionel Richie is working with J.C. Penney on an exclusive home brand.
  • The home category is growing for Penney as apparel shrinks.
  • More and more retailers are using celebrities or brand ambassadors to attract shoppers.
Source: JC Penney

J.C. Penney is teaming up with singer-songwriter Lionel Richie for the retailer's latest brand.

The department store chain has already found success in curating exclusive men's clothing lines backed by Michael Strahan and Shaquille O'Neal, a beauty line by Rihanna (for Sephora shops inside J.C. Penney) and a holiday collection with Tracee Ellis Ross, most recently.

By the end of fiscal 2017, 47 percent of J.C. Penney's merchandise sales came from national brands, 46 percent from private-label brands and 7 percent from entirely exclusive brands. National brands had grabbed a slightly higher share of 48 percent in 2016 and 2015. But that piece of the pie has been diminishing slowly ever since.

Penney hopes a home collection with Richie will lead to another boost to its exclusive business, as retailers are looking for ways to stand out from their peers and lure shoppers into stores in an increasingly competitive environment. The last time the company partnered with a celebrity for its home category was with Eva Longoria in 2015.

"What Lionel Richie brings is ... his terrific brand equity," Katheryn Burchett, senior vice president of merchandising at Penney, told CNBC. "We are differentiating ourselves and ... that comes in the form of our private brands as well as our partners exclusive to J.C. Penney."

Richie hasn't had a new album in years, but he has been back in the spotlight serving alongside singers Katy Perry and Luke Bryan as a judge on the ABC program "American Idol." The renewed buzz around his name makes it an opportune time for Penney to tap him for the new line.

Burchett said that after surveying Penney's existing customers via E-Poll Market Research, 98 percent of them were "aware" of Richie. More than 70 percent of Penney's loyal shoppers today are female homeowners, she said, with an average household income of roughly $70,000, according to Kantar Retail.

With respect to its home business, Burchett said it's "really growing" and is increasingly important to the average Penney shopper.

The home category for Penney represented 15 percent of its merchandise mix at the end of fiscal 2017, compared with 13 percent in 2016 and 12 percent in 2015. Apparel meanwhile has been shrinking as women's accessories and services take a larger share.

Other retailers also have been shifting investments to their home businesses of late, including Target, which now has an exclusive line with HGTV stars Chip & Joanna Gaines. Though not backed by a celebrity, Walmart also just rolled out a new private home brand, Allswell.

Penney's new line with Richie, which includes a queen comforter retailing for $129.99, a set of towels for $39.99 and pillow cases for $19.99, is already available on JCPenney.com and will roll out to about 200 stores by this fall.

According to Burchett, the line could expand to more U.S. locations depending on shoppers' reactions to the launch.

"We will have to wait and see what happens. We want to appeal to existing customers. That said, we are also trying to attract new customers," she said.

Penney could use a boost after a bumpy start to the year.

During the holiday period, the retailer's revenue and same-store sales fell short of analysts' expectations, leading investors to believe its turnaround efforts were losing steam. In the prior quarter, it was evident Penney had been trimming excess inventory and cutting back on promotions.

Still, CEO Marvin Ellison and his management team have said Penney will continue to invest heavily in building out a suite of in-house and exclusive brands.

"Our ... brands had continued to improve with respect to our margins," CFO Jeff Davis said on a recent call with analysts and investors. The growth internally allows Penney to rotate inventory more at its leisure, he said, and keep a tighter control on pricing.

J.C. Penney's stock is down 45 percent from a year ago.