About KOHL'S DEPARTMENT STORES, INC.

Kohl's wants its prices to be easy on shoppers and tough on competition. The clothing retailer operates about 1,160 department stores in 49 states, with nearly half of stores in the Midwest and West. Competing with discount and mid-level department stores, it sells moderately priced name-brand and private-label apparel, shoes, accessories, and housewares through centrally located cash registers designed to speed checkout and keep staff costs down. Merchandising relationships allow Kohl's to carry top brands (NIKE, Levi's, OshKosh B'Gosh) not always available to discounters; it's able to sell them for lower prices by controlling costs. A typical store spans 88,000 sq. ft., and serves markets with 150,000 to 200,000 people.

Operations

By product, Kohl's generated 31% of its sales from women's clothing in fiscal 2015 (ended January), while 19% of sales came from men's clothing. The rest of the retailer's sales came from home products (18% of sales), children's clothing (13%), accessories (10%), and footwear (9%). About 50% of its sales were products tied to national brands, while the other half of sales were tied to private & exclusive brands.

Geographic Reach

While the retailer operates in 49 US states, nearly one-third of its stores are in the states of California, Texas, Illinois, Ohio, and Florida.To support its brick-and-mortar and online businesses, Wisconsin-based Kohl's maintains a network of more than a dozen distribution centers nationwide in Findlay, Ohio; Winchester, Virginia; Blue Springs, Missouri; Corsicana, Texas; Mamakating, New York; San Bernardino, California; Macon, Georgia; Patterson, California; and Ottawa, Illinois.

Facilities that cater to the Kohl's e-commerce business are located in Monroe, Ohio; San Bernardino, California; Edgewood, Maryland; and DeSoto, Texas. The company also operates design studios in New York City and in Santa Monica, California.

Sales and Marketing

Kohl's has been boosting its ad spending in recent years, particularly on promotional activities and typical costs related to television and radio broadcasts, direct mail, and newspaper circulars. It spent $1,024 million in fiscal 2015 (ends January), up from $1,013 million and $993 million in fiscal years 2014 and 2013, respectively. This represented 5.4%, 5.3%, and 5.2% of its total sales for each of those years, respectively.

The company sells its products through its stores (91% of sales), online (9%), and through in-store kiosks that offer customers free shipping to their homes. Kohl's purchases its merchandise from both domestic and foreign suppliers. A third-party purchasing agent supplies about 30% of the company's merchandise.

Financial Performance

Kohl's revenues have been flat over the past few years with few new store openings and sluggish comparable store sales growth. Its profits have also been in a slow decline as rising merchandise costs have caused margins to shrink, and as it's been spending more on investments in IT and marketing to support growth.

The retailer's revenue dipped by less than 1% to $19.02 billion in fiscal 2015 (ended January) as sales volumes per transaction fell with higher prices of items (as it began pushing more expensive national brand items). By product, sales increased for children's (especially toys) and men's clothing, and footwear, while sales underperformed in the home and women's product categories. Active-type clothing was the strongest performer in all of these categories. By geography, sales rose in the West, Southeast, and Midwest, while sales declined in the Northeast, Mid-Atlantic, and South Central regions.

Sales declines and a continued uptick in costs of merchandise from shipping costs in FY2015 caused the retailer's net income to tumble 2% to $867 million. Kohl's operating cash levels climbed 7% to $2 billion for the year as it reduced its store inventory by 2% and units per store by 3%, and because its accounts payable balances increased from higher receipt volumes and the timing of payments to certain vendors.

Strategy

Kohl's announced in fall of 2015 that it would be tweaking its multi-year "Greatness Agenda" strategy (introduced in late 2014), which was designed to drive organic top-line growth by focusing on five pillars: amazing product, incredible savings, easy experience, personalized connections, and winning teams.

After receiving feedback from customers and associates during the strategy's first year, the company planned to support its five pillars by leveraging several strategies, including: creating custom store assortments according to local market tastes, focusing more on women's apparel, launching new formats and distribution centers to boost sales, driving traffic in stores through online buying and in-store pick up, and by continuing to promote its Yes2You rewards program (which had 33 million members after one year), especially after the firm discovered that 80% of its sales were tied to repeat customers. Recognizing that national brands drive traffic, the firm also continued its pivot toward pushing new key national brands like FitBit, Madden Girl, Columbia, Samsung, Bliss and other brands, especially in the popular active and wellness categories.

The retailer has been tweaking its store layout to boost same-store sales in recent years, remodeling stores and increasing the number of small and urban stores in its portfolio to tailor its size to new markets. In late 2015, it planned to open "10 to 15" of its "smaller, more nimble" prototype stores (with around 35,000 sq. ft. of selling space) in underserved markets through 2016. The chain also planned to remodel around 30 stores after remodeling some 50 stores in FY2014.

Company Background

Kohl's own brands were key to Kohl's merchandising strategy in past years. In 2012, in a bid to emulate its "cheap chic" rival Target and also longtime competitor J. C. Penney, Kohl's began enlisting big-name designers to produce merchandise exclusively for its stores. In building its "Available Only at Kohl's" business, the discounter offered a low-cost collection named Simply Vera in stores and online as the result of the deal with designer Vera Wang. It inked a similar alliance with upscale jeans maker Rock & Republic, Food Network, LC Lauren Conrad, and FILA Sport, as well as "DesigNation" limited-edition collections from designers Narcisco Rodriguez in 2012, Derek Lam in spring 2013, and Catherine Malandrino in fall 2013.

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KOHL'S DEPARTMENT STORES, INC.

N56w17000 Ridgewood Dr
Menomonee Falls, WI 53051-7096
Phone: 1 (262) 703-7000
www.kohlscareers.com

Stats

  • Employer Type: Public
  • Cco: Michelle Gass
  • Exec Vp-cio: John Lesko
  • Chief Operating Officer: Arlene Meier

Major Office Locations

  • Menomonee Falls, WI
  • Milwaukee, WI

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