Penney wonders: Is home where the profit lives?

New York - J.C. Penney is homing in on its home department as part of a bigger plan to turn its stores into mini-malls of sorts.

The struggling department-store chain is unveiling revamped home areas within its stores that feature 20 boutiques that highlight 50 new brands. The areas will include an eclectic mix of items, from $60 Michael Graves' stainless steel teakettles to $1,850 Jonathan Adler "Happy Chic" sofas.

The home areas, which Penney will begin to roll out Friday at 500 of its 1,100 stores, are big tests of CEO Ron Johnson's plan to open separate shops-within-stores for popular designers. The format, which gives department stores more of a mini-mall feel, have been popular at higher-end rivals such as Macy's and Bloomingdale's for years.

Penney hopes the new home areas will help it woo back shoppers as it struggles to rebound after it lost a quarter of its revenue and amassed nearly $1 billion in losses in the past year. The revamp certainly presents a big opportunity for the retailer.

While home sections typically are among the least profitable of a department store, they help to drive customers into the store. And demand for home furnishings is rebounding along with the U.S. housing market: Sales of furniture and home decor reached $92.9 billion last year, up 7.8 percent from the low of $86.2 billion in 2009 during the recession, according to spending tracker MasterCard Advisors' SpendingPulse.

"It's going to be a struggle, but the home area could generate some momentum," says Walter Loeb, a New York-based independent retail consultant.

But Penney, based in Plano, Texas, has its work cut out for it. Penney was planning to anchor its home areas with the Martha Stewart lifestyle brand. But the company is fighting in court with Macy's over whether Macy's has exclusive rights to sell certain Martha Stewart products like bedding, cookware and bath items.

Adding to that, Penney's home business has lost considerable cachet from its heyday. The business once accounted for nearly 20 percent of Penney's total store sales, but that number has dropped to 10 percent as the assortments have failed to attract the younger customers who update their homes more often than their older counterparts. In fact, Penney says that its home department, which had attracted an average age of 45, has the oldest shopper compared with rivals like Target Corp. and Macy's.

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