Shares of J.C. Penney (JCP) dropped after the company said it will shift its strategy away from home appliances toward apparel and other higher margin opportunities.

J.C. PENNEY TO STOP SELLING MAJOR APPLIANCES: J.C. Penney announced on Wednesday that it will stop selling major appliances in order to improve financial performance and drive profitable growth. Additionally, the struggling retailer said it will mostly stop selling furniture, and that furniture will now only be available online and in select Puerto Rico stores. The changes will be effective on February 28."While configurations vary by store, we are finalizing new layout options, including the reduction of store space previously dedicated to appliance and furniture showrooms to maximize efficiencies, reduce inventory and create an enhanced shopping experience that inspires repeat shopping trips," the company said in a blog post.

Instead, the company plans to prioritize and focus on its "legacy strengths" in apparel and "soft" home furnishings, which it said represents higher margin opportunities.

WHAT'S NOTABLE: Mall-based retailers, including J.C. Penney, have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as online shopping at Amazon (AMZN). J.C. Penney has struggled more than some of its peers, including Nordstrom (JWN) and Macy's (M), and in August, again cut its outlook for fiscal 2018 as it continued to deal with too much inventory. The retailer later withdrew its FY18 guidance after it announced both a new CEO and an interim CFO to "allow the ability to effectively assess and address current and go-forward execution of the business." New CEO Jill Soltau, the former president and CEO of Joann Stores, said on J.C. Penney's Q3 earnings conference call in November that restoring the company to profitable growth will be a "lengthy" process.

In January, J.C. Penney said its comparable store sales for the nine-week period ending January 5 fell 3.5% on a shifted basis, with sales falling 5.4% on an "unshifted" basis. The company previously said that appliances underperformed in the third quarter. 

Former CEO Marvin Ellison, who left the company last May to become CEO of Lowe's (LOW), made the move into appliances in 2016, but the company faced challenges from expanded offerings from Lowe's and Home Depot (HD). Under Ellison, J.C. Penney moved appliances into about 600 stores. Under new CEO Soltau, J.C. Penney has has shut locations around the country, cut jobs and renovated stores as part of a multi-year turnaround plan.

PRICE ACTION:  In afternoon trading, shares of J.C. Penney are down 1.1% to $1.34.