Kohl's Makes Grab for Market Share

As Holiday Season Nears, Retailer Opens More Stores And Plans Aggressive Discount Pricing

Kohl's Corp. is opening 46 stores Wednesday as part of an aggressive effort to take market share from competitors just as the holiday season gets under way and U.S. consumer spending is stagnating.

"We've been in a period now for over a year where the customer is shopping less," says Kevin Mansell, who became chief executive of the Menomonee Falls, Wis., retailer in August. "You'd better start figuring out how you're going to take more from the other guy."

The middle-market chain, which competes head-on with J.C. Penney Co. plans to open a total of 75 new stores in 2008, Mr. Mansell says. After the new openings this fall, which include one more in November, the total Kohl's store count will be 1,004, or just shy of J.C. Penney's 1,083. . . . more

Kohl's opens 1,000th store(s): Sizing up the shopper

Kohl's Corp. has opened its 1,000th store this week in Burlington. And in Manitowoc, and at 44 other locations around the country. You can take your pick. Like a good parent, Kohl's is refusing to play favorites by designating any one of the 46 stores to open as the official 1,000th in the Menomonee Falls-based chain.

Though the stores opened without fanfare Sunday, grand opening ceremonies are scheduled for Wednesday at all 46 stores. The new locations will put the company at 1,003 stores in 48 states. Another store will open in November.

"One thousand stores is generally kind of a marker for us," said chief executive officer Kevin Mansell. "What it says is that we have a concept that works."

. . . more

Kohl's To Cut '09 Store Openings, To Emphasize Exclusive Brands

Kohl's Corp. (KSS) said Wednesday it will cut its 2009 new store openings to 50 from 90, but sees the money saved as aiding opportunities for expansion from coming "consolidation" in the retail industry. "We are keeping our powder dry" for consolidation of retailers and retail outlets that will come in the next few years, or as soon as "the next six months," said Kohl's Chairman Larry Montgomery.

Montgomery, who relinquished the title of chief executive to Kohl's President Kevin Mansell last month, spoke in New York City at a retail conference sponsored by Goldman Sachs.

Kohl's said last year it would have 1,400 stores by 2012, but now isn't expected to reach that number as soon. Montgomery did not give a timeframe.

As for the 50 openings for next year, "We want to be prudent" given economic conditions and also have cash on hand for opportunistic acquisitions, Montgomery said.

The company also plans to play up its exclusive lines from designers like Vera Wang and introduce new ones. Its own private-label products are also going to be a focus.

Both exclusive and private-label lines generally carry higher margins than branded products from outside companies.

When it comes to producing its apparel, Kohl's plans to be nimble by doing more in Vietnam and Central America as inflation in China grows, Montgomery said.

He added that Kohl's also plans an early start to its holiday promotion season in the U.S.

Source: Morningstar.com

Retailers 'Sell' to Young Virtually

Kohl's, Sears Build Brands As Children Clothe Their Avatars Online

Retailer Kohl's Corp. this month launched a new line of apparel, but the plaid skirts and printed T-shirts won't be sold in its 957 stores. Instead, it's selling them on Stardoll.com, a virtual community for teens and tweens where kids can fork over "Stardollars" -- purchased online at a nominal sum -- to buy apparel for their online characters.

With back-to-school sales off to a slow start, more old-line retailers and clothing labels are reaching out to kids online, enticing them to try virtual versions of their togs in hopes of making actual sales later. Kohl's first virtual line features pieces from its new Abbey Dawn collection, designed by singer Avril Lavigne. In its first 16 days, Kohl's Stardoll boutique logged some 2.2 million visits and sold 1.8 million items. Kohls.com lured 97,000 visitors who clicked through from the boutique site.

Kohl's

In the Kohl's boutique on Stardoll.com, kids can dress an online character in the retailers' brands. More big-name retailers are embracing virtual worlds to reach teens.

This month, casual-wear maker K-Swiss Inc. and lingerie and swimwear designer Eberjey rolled out virtual clothes on There.com. And in late July, retail pioneer Sears Holdings Corp. opened its first online boutique featuring back-to-school apparel and dorm-room furniture on teen site Zwinky.com. Sears said the boutiques logged 750,000 visitors and sold 850,000 virtual items during their first 16 days through mid-August.

These mainline retailers hope the virtual showrooms will be more effective than traditional ads in hooking tweens and teens. Users of the sites already can spend virtual dollars on virtual clothes designed by the sites, or by early adopters such as American Apparel Inc. that went virtual two years ago. The sites are places to fashion digital personalities, called "avatars,"

participants use to explore new styles, relationships and behaviors. Typically, these sites now offer a click through to buy the real products.

"When you look at an ad, it's pretty quick," said Jennifer Weiderman, vice president of global marketing for K-Swiss. "But when they're in this virtual world, this gets them to spend more time [viewing] your product. It's a little bit more sticky."

Ms. Weiderman said she is dialing back her spending on TV ads this year and expects to allocate 15% of her marketing budget to online initiatives, up from 5% last year. Sears and J.C. Penney Co., which last month made virtual versions of its teen and young-adult clothing available to users of Yahoo's instant messenger service, say they've increased online ad spending this year. Kohl's also said it is allocating more of its online ad dollars this year to targeting teens. None would detail the scale of the budget shift.

Details of the arrangements vary, but a retailer or brand typically pays a fee to have a virtual community host and develop its store and products. At There.com, the fee ranges from a few hundred dollars to a few thousand, depending on how elaborate the store is and how many items will be sold. The brand and the Web site sometimes split revenue from the virtual purchases. But since virtual clothes cost from under $1 to $5 -- brands regard this revenue as negligible.

"It's really a way to get shoppers to test-drive your product," said Carlos Mejia, chief financial officer of Eberjey, a maker of lingerie, swimwear and sleepwear. The brand, which largely sells to women ages 20 to 45, hopes to attract teenagers with its virtual line.

Penney decided this year to put back-to-school outfits on Yahoo after learning that, during a seven-week experiment last summer, 1.5 million avatars wore its clothing on Yahoo and 5 million Penney outfits were tried on. "It casts a very modern, current light on the brand with teens," says Mike Boylson, Penney's chief marketing officer. Before Penney's presence on Yahoo, "perhaps J.C. Penney wasn't on their radar before," he says.

Sears is marketing its virtual boutiques on billboards in the virtual world, and is hosting daily fashion shows on the site promoting its products through the end of August.

Not everyone is pleased. Patti Miller, vice president of Children Now, an Oakland, Calif.-based national children's advocacy group, expressed concern over marketing to youngsters via these virtual shops. The Federal Communications Commission in 1990 established rules governing the hourly amount of advertising directed at children. But the newer, Web-based virtual communities that have replaced TV viewing for some kids have no similar restrictions.

"Some of these younger kids, those younger than 8 and even kids up to 12, can't make the distinction between what's advertising and what's not," says Ms. Miller. She says children may not grasp that the virtual stores function as a brand advertisement.

Dave Bazant, Sears' marketing manager for online and emerging media, argues that children who frequent the virtual sites are savvy enough to know that the stores also function as a branding tool.

"It's fairly transparent -- kids are not very naïve these days," says Mr. Bazant. He notes that Sears is careful to not aggressively push its wares in these sites because teens and tweens are "turned off by direct advertising. We're not giving away our product for free. Most of these items, they have to purchase."

The online pitches are striking a chord with Jen Rediger's daughters, 13-year-old Tyler and 9-year-old Kenzie. In the first week that the Kohl's store opened on Stardoll, they spent about 70 Star Dollars, or $7, on virtual skirts and shoes. Ms. Rediger, 32, an interior designer who lives in Hoschton, Ga., says she doesn't mind her daughters being exposed to such marketing because "it's not worse than what they see on television."

Tyler has already asked her mom to take her to Kohl's to buy the real versions. "They look really cool on my doll," she says. "It's my style so I think I'll wear it a lot."

Source: Wall Street Journal

Retailers already have back-to-school sales on their minds

Summer has barely begun, but retailers are already focusing on back-to-school sales, which are expected to be especially critical this year as consumers rein in spending.

The back-to-school season is the industry's second-biggest selling period after Christmas. And as new fall merchandise starts to arrive in stores this week, competition is expected to be fiercest in the middle market, among chains such as Kohl's Corp., J.C. Penney Co. and Macy's Inc.

Many of their clients, squeezed by high gasoline prices and the weak economy, are turning to discounters like Wal-Mart Stores Inc., with whom the chains can't compete on price. Instead, they rely heavily on unique merchandise and attention-grabbing marketing to attract consumers.

They could face an uphill battle. Sales of back-to-school and college merchandise between July 4 and Labor Day are expected to be flat to slightly lower this year, following a year-earlier increase of 21 percent to $65.7 billion. Some industry research suggests consumers may minimize apparel purchases this year in favor of necessities like textbooks and computers.

Nor is there a clear must-have electronic gadget likely to nudge parents or teens to splurge, says Kathy Grannis, a spokeswoman for the National Retail Federation. That's a switch from the past two years, when gear like cellphones and MP3 players gave back-to-school sales a major boost.

Kohl's hopes to drum up interest by kicking off what it calls its biggest back-to-school campaign ever next week, a week earlier than usual. This month, it will launch an exclusive line of girls' apparel and accessories by singer Avril Lavigne.

The chain's ads will feature celebrities ranging from Lenny Kravitz to teen actress Hayden Panettiere, who recall favorite fashion moments. Kohl's is soliciting similar videos from young shoppers through a contest on social-networking site Facebook.

J.C. Penney is launching five exclusive or private-label brands for back-to-school this month, the largest number it has ever launched simultaneously. "It's a huge time of the year for us, and we're spending against it," says Mike Boylson, Penney's chief marketing officer.

The new lines include Fabulosity apparel and accessories, designed by former model Kimora Lee Simmons, and Dorm Life, a line of home furnishings aimed at college students. To promote the lines, Penney created an online game called "DorkDodge," in which a girl has to navigate a thicket of undesirable boys to get her dream guy. It also plans to air a 60-second spot in theaters recreating scenes from the 1985 teen film "The Breakfast Club," which is having a resurgence.

Macy's is also targeting young shoppers. Next month, it begins filming a documentary that follows five young adults as they roadtrip across the U.S., visiting 12 cities and meeting musicians and music producers -- all while wearing clothing by Macy's American Rag label. The 10-episode show, titled "Ragged Road," will begin airing on YouTube.com in September. It will feature live video blogs.

Source: Daily Herald

Kohl’s gets lift from better exclusives

Chicago – Trading up with exclusive brands is working well in the home department, said mid-tier retailer Kohl’s – and the company intends to accelerate the process.

Even though the home business is “still pretty soft,” said Kohl’s chairman and ceo Larry Montgomery, speaking at the William Blair & Company Growth Stock Conference here today, the 957-store chain is “drawing customers from traditional department stores” as such shoppers give Kohl’s “huge credit” for its upgrades to quality, value and styling across its merchandise mix.

Montgomery said these fashion brand-destination Kohl’s consumers, “shopping for example for Simply Vera Vera Wang – are spending more, they’re opening up charge accounts, and they’re shopping in more than one area – which is like the trifecta for us.”

John Worthington, senior evp of stores, emphasized that long-term plans are bearing fruit at Kohl’s. He referred to the expansion of the better and best levels of merchandise, and the exclusive brands that have been added to the mix over the last two to three years, including Candie’s, Simply Vera Vera Wang, Daisy O, Elle, apt. 9 and Food Network. “Contemporary and updated are also growing well,” he said of those fashion components.

Kohl’s hit a 39% penetration of private and exclusive labels in 2007, and expects that to reach about 41% this year.

Worthington said in-store presentation has been key; for example, he noted that the use of “strike point” corner fixture packages has received favorable customer feedback, and said, “Everything on it exceeded plan.”

Source: Home Textiles Today

Putting on the Brakes: Kohl's Latest Retailer To Cut Back Expansion

The retailer plans to slow its store expansion plans and won't reach its previously announced goal of 1,400 stores by 2012, chairman and chief executive officer Larry Montgomery said. "We're probably going to take a couple of years longer than we originally planned to get to that," Montgomery said following the company's annual meeting at the Milwaukee Theater here. The 957-unit retailer will take the pulse of the economy each year and adjust its store opening plans accordingly, he said. The $16.5 billion Kohl's has been adding 95 to 100 stores annually in recent years, but will open only about 75 stores this year because of the economic climate. By the end of the year, the company will reach 1,000 stores, including an entry into the Miami-Fort Lauderdale market. Last year, Kohl's opened 112 stores.

Kohl's is not alone in scaling back store openings. Last month, J.C. Penney said it would reduce openings to 36, from 50, leading to a savings of $200 million in capital expenditures. Penney's has slated 20 major store renovations, down from the 65 originally planned.As competitors close stores, Kohl's, based in Menomonee Falls, Wis., will take advantage of real estate opportunities, said Montgomery. "We have a pecking order," he said, but he declined to say which competitor's locations were on his list. Despite the difficult economy, exclusive brands are the fastest-growing part of Kohl's business, Montgomery said, calling the performance "spectacular."Chaps sales are rising by double digits, despite new competition from Penney's launch of American Living, a Ralph Lauren brand, Montgomery said. Rollouts of names such as Elle, Simply Vera Vera Wang, Food Network and others have pushed the percentage of brands exclusive to Kohl's from zero three years ago to nearly 11 percent at the end of last year.

Kohl's' private label brands accounted for 28 percent of total sales in 2007. This year, Kohl's expects the combined percentage of private and exclusive brands to increase to as much as 41 percent of sales, driven by growth of Elle, Food Network and Simply Vera Vera Wang, as well as new products from Bobby Flay, Jumping Beans and Fila Sport.Bobby Flay's line of cookware, dinnerware and kitchen gadgets was launched in some stores about 10 days ago and will be in all stores by May 15. Early sales are good, Montgomery said. Elle, meanwhile, has been expanded to all stores, after bowing last fall in 450 stores. The Elle brand will be extended to footwear and handbags in select markets this fall, said Kohl's president Kevin Mansell. All of the expansion of exclusive labels will come at the expense of national brands, Montgomery said.

Kohl's same-store sales decreased 3.2 percent for the nine weeks ended April 5, and comparable-store sales decreased 11.1 percent.For the fourth quarter ended Feb. 2, Kohl's reported that profits fell 15 percent to $411.7 million from $484.6 million a year ago, when the quarter included one additional week, while sales inched up 0.7 percent to $5.49 billion from $5.45 billion. For the full year, Kohl's earnings slid 2.2 percent to $1.08 billion, as sales rose 5.6 percent to $16.47 billion. In both the fourth quarter and the full year, the accessories department led Kohl's results with comp-store sales increases, while men's apparel and footwear also beat the store's overall results, leaving the women's apparel and home departments lagging.Montgomery said Wednesday that exclusive brands have the best gross margins because of the huge sell-throughs. He said the company was rolling out new exclusives in a methodical, organized manner.Fila and Dana Buchman are the next two promising exclusives, Montgomery said. Fila Sport will launch in all stores in September in men's, women's and children's. Dana Buchman will become an exclusive Kohl's brand in spring 2009, with a collection of women's apparel, intimates, accessories and footwear.

Kohl's said it continues to evolve its store design. Some of the new stores will have the latest design innovations that the company unveiled at a new store in Grafton, Wis., in April. The juniors department has wood flooring and a flat-screen TV in its upgraded fitting room area. For the first time, Kohl's has brought accessories into the juniors area as part of its strategic initiative to encourage cross-departmental shopping. The store also has an upgraded intimates department, with draperies on display walls and columns for a more feminine look. Kohl's will decide on how much of this design to incorporate into new stores in the future after determining whether the changes improve sales, Montgomery said.Kohl's will announce plans for next year in August, along with its second-quarter earnings report. "We are planning inventory levels and expenses based upon very conservative sales estimates while continuing to invest the necessary resources to ensure our profitable growth over the long term," said Montgomery during the hour-long meeting attended by some 1,000 people. In addition to shareholders, Kohl's invites an associate from every store to attend, as well as executives from headquarters.

A shareholder from Madison, Wis., asked whether the company was considering providing Internet access in stores so customers who can't find an item can place an order on kohls.com while in the store. Montgomery said such a plan is part of Kohl's efforts to promote cross-channel shopping. He said the company plans to place kiosks in stores that would take online orders. Meanwhile, in a Wednesday presentation at Lehman Brothers' annual retail conference in New York, Myron Ullman 3rd, chairman and ceo of Penney's, said the retailer is whittling fall inventory in response to the tough economic environment."We believe we will be below last year's dollar inventory by the end of back-to-school," Ullman said. "We're certainly more cautious now than we would have been even six months ago as we look at fall."Nonetheless, Ullman said he thought fall selling would be "more positive" than last year and was somewhat optimistic that holiday results will be better, too.

Ullman also said he sees further retail consolidation. "My guess is there will be 10 to 20 companies that will find it very difficult to get through this period," he said, adding that fine jewelers, home stores and regional players short on cash were especially vulnerable."The strong get stronger during these periods and we do expect to gain market share during this period," Ullman asserted."We believe [product] flow is the secret to improving our gross profit...because we believe we have trend-right merchandise delivered more frequently in a shorter cycle time," he noted.On Wednesday, Penney's stock closed at $42.50, down $1.17, or 2.7 percent, while Kohl's stock closed at 48.65, off $1.61, or 3.2 percent, on the New York Stock Exchange.

Source: WWD

Kohl's and JCPenney Will Make You Cry

When it comes to TV commercials, I don't have the time. I'm off to grab a snack, fold laundry--anything but watch 30 to 60 seconds of someone telling me I can't live without their product or service. But lately, two apparel retailers have been stopping me dead in my tracks, as I stare at the television in absolute awe. The new Kohl's commercial actually stopped me mid-bite. And nothing gets between me and my food. Until now.

Soft blue colors, gorgeous clothes, Ben Lee crooning "We're All in This Together" drew me in. Suddenly, I had chills. My eyes misted with tears. I wasn't being told to buy anything, I was being invited into a lifestyle where the sky is perfectly blue, the hair is neatly coiffed and the clothes are worn effortlessly (and don't even need to be pressed!). Little children giggle, and the adults are at ease. I want to live there! Thankfully, via YouTube, I can watch this masterpiece again and again.

JCPenney's American Living commercial elicits the same kind of response from me. I can't even talk when this commercial comes on--I shush everyone in the room. It's more subtle than the Kohl's ad, because I don't even notice the clothes. Yeah, it looks a bit like summer in the Hampton's (very Ralph Lauren), but the rest reminds me of growing up, falling in love and laughing with my family. And how cute is the little girl in the red boots stepping on her birthday cake? I mean, seriously. By the end, I'm pulling out the Kleenex. I'm sure Alison Krauss and Robert Plant's version of "Killing the Blues" isn't helping. Don't believe me? Check out YouTube and you'll also find yourself suspended in time, smiling and covered in goose bumps.

Pure genius. Kohl's and JCPenney are employing the same tactics that have made Apple and Nike successful for so long--using a combination of beautiful imagery and music to sell a lifestyle (that just happens to be donning their product). I'm convinced that the success of these commercials is all in the song choice, because it dramatically takes you to whatever you're being shown visually.

Yay Kohl's and JCPenney! I would love to see more retailers employ these advertising methods-- it's not about sales and shoving a product down someone's throat; it's about making people feel something so overwhelming that they can't help but fall in love with your product. And then, tell everyone about it. In a blog.

Now, if you'll excuse me, I'm off to shop at my two new favorite stores...

Source: Retail Design Diva

Kohls offering discount chic

Midtier department store chain Kohl's (42, KSS) is managing through the tough times with style. Retail is among the most damaged sectors in the current downturn, as pinched customers stay away from stores. While controlling inventory and cutting expenses with the best of them, Kohl's is doubling-down in cheap chic. That's the trend among pedestrian retailers to class up their offerings with high-end names, such as Martha Stewart housewares at Kmart and Isaac Mizrahi clothing at Target.

Kohl's lately has been busy launching women's fashions from designer Vera Wang, shoes from skateboarder Tony Hawk and kitchenware from celebrity chef Bobby Flay. Wang's dresses and handbags often sell for under $100 at Kohl's, versus the four-figure goods she peddles at chichi boutiques.

Kohl's also is targeting young (under 25) women as the exclusive retailer for Candie's apparel and shoes. Teen actress Hayden Panettiere will serve as Candie's spokesperson for the spring marketing campaign. Later this year the 930-store Kohl's chain will expand its Elle fashion offerings and debut new Fila apparel and footwear. In 2009 it plans to offer women's clothes from Dana Buchman, a renowned women's apparel brand that is a division of Liz Claiborne.

To Richard Jaffe, retail analyst at Stifel Nicolaus, this all will pay off eventually, expanding Kohl's market share and its margins. For the moment, though, Kohl's has taken its knocks. Same-store sales for the holiday quarter dropped 4%. For fiscal 2007 (ended Feb. 2, 2008) the company reported net income of $1.1 billion, flat compared with 2006, on revenue of $16.5 billion. The stock trades at a modest trailing price/earnings multiple of 12, versus 15 for Target , 16 for Wal-Mart.

Source: Forbes