Sephora shops will open in a "handful" of existing J.C. Penney stores this year, according to management, as well as the 27 new stores the department-store chain is opening this year. Next year, the companies will focus on putting them into new J.C. Penney units. In 2008, the J.C. Penney will start work on putting Sephoras into the lot of its store base, which now numbers 1,019 units.

The Sephoras in J.C. Penney will be located in the middle of the store, averaging between 1,500 sf and 1,800 sf. The store-within-a-store model will visually look like a Sephora unit, featuring the gondola-style fixtures found in those locations, said Myron Ullman, J.C. Penney's chairman and chief executive officer, in a conference call announcing the deal. "Hopefully you'll be able to blink and not know whether you're in a market Sephora stand-alone of be in our store," he says.

Ullman also says that Sephora and J.C. Penney customers, on average, have the same spending habits. The two retailers will also cross-sell products through both companies' websites.