Kohl’s

Introduction

The American department store chain Kohl’s (stylized all capitals) is run by Kohl’s Corporation. As of right now, it operates 1,165 stores across all states in the union with the exception of Hawaii. Maxwell Kohl, a Polish immigrant who established the business in 1927, started a corner grocery store in Milwaukee, Wisconsin. After growing to be a prosperous chain in the neighborhood, the business expanded by establishing its first department store in 1962. While remaining under the management of the Kohl Family, the company was acquired by British American Tobacco Company in 1972 and sold to BATUS Inc. in 1979. British American Tobacco sold the business to a group of investors in 1986, and the company went public in 1992.
Kohl’s headquarters are located in Menomonee Falls, Wisconsin, a suburb of Milwaukee.It surpassed its largest rival, J. C. Penney, to become the largest department store chain in the United States in May 2012.The corporation is listed on the Fortune 500 as well as the S&P 400. The chain ranked as the 23rd largest retailer in the US in terms of revenue in 2019.By retail sales, Kohl’s was the second-biggest department store chain in the United States as of 2013.
Tom Kingsbury has been the CEO as of February 2023; he took the role in December 2022 after acting in an acting capacity. After Michelle Gass accepted a job with Levi Strauss, he took her place.

History

1962 saw the opening of the first Kohl’s department store in Brookfield, Wisconsin. In the Midwest, there were 76 Kohl’s locations when the firm went public in 1992. Since the 2001 introduction of Kohls.com, Kohl’s online presence has expanded and changed.
With its headquarters located in the suburban Menomonee Falls, Kohl’s Corporation, a Fortune 500 firm, runs a nationwide chain of more than 1,100 department stores. In 2014, the Corporation’s sales exceeded $19 billion. In 2015, Kohl’s employed 137,500 people in its corporate and retail sites, and it operated stores in all states but Hawaii. Wisconsin was home to 10,500 Kohl’s employees and forty of their locations.
Despite becoming a well-known department store chain across the country, Kohl’s started out in the food industry. Max Kohl, a Polish Jewish immigrant to Milwaukee, established a conventional grocery shop in the Bay View neighborhood in the 1920s near the intersection of Lincoln Avenue and Kinnickinnic Avenue. In 1946, over twenty years later, he set up shop in Milwaukee’s Sherman Park area with his first store. In an effort to attract more customers to his establishments, Kohl launched his first department store and supermarket together in 1962.
Beyond only selling groceries, Kohl and his sons kept growing their business. The Kohls started building Granville’s Northridge and Greendale’s Southridge shopping centers in 1967. The retail business of the Kohl family comprised three drug stores, three liquor stores, six department stores, and fifty-six supermarkets by 1972. In the same year, a British American Tobacco Company affiliate purchased a majority stake in Kohl’s retail locations. Herb Kohl, the future owner of the Milwaukee Bucks and a U.S. Senator, had stepped down as Kohl’s president before the end of the decade. The last Kohl family member to head the business was Herb Kohl.


Kohl’s started expanding across the country in the 1980s and 1990s after seeing yet another leadership transition. British American Tobacco opted to divest the Kohl’s Department Stores three years after selling off the Kohl’s Food Stores in 1983. William Kellogg led a group of investors and management leaders who purchased the 40-store retail company. The business aggressively grew, starting in 1988 when it bought Federated’s Main Street locations. Kohl’s gained entry into the Chicago, Detroit, and Minneapolis-St. Paul areas with this acquisition. The leadership of the company decided to go public with Kohl’s initial public offering in 1992 due to the company’s sustained development. Kohl’s joined the S&P 500 in 1998. The department store business had officially expanded from coast to coast when it established twenty-eight stores in California in 2003.Kohl’s business strategy, which places it in the middle of department shops and bargain stores, has contributed to its success, but it has not been without criticism. Because Kohl’s has fewer overhead costs and carries major names, it can frequently provide lower prices than department stores. The business is well-known for charging these rates via operating sales on significant portions of its inventory. Kohl’s has to contend with online competitors in the twenty-first century in addition to the constant threats posed by traditional big box competitors. Kohl has undoubtedly continued to succeed by pursuing middle-class families, though.

Store design and brands

Diffusion lines by upscale designers including Dana Buchman, Vera Wang, Narciso Rodriguez, and Peter Som are available at Kohl’s store brands. Branded apparel has only been sold by celebrities like Marc Anthony, Tony Hawk, Avril Lavigne, Daisy Fuentes, Paula DeAnda, Jennifer Lopez, and Britney Spears through Kohl’s.


Of Kohl’s $19 billion in yearly sales, almost half come from its own brands. Among them are house brands for apparel, like Apt. 9, American Beauty, Croft & Barrow, Jumping Beans, So, Tek Gear, and Urban Pipeline. Kohl’s revealed plans to revive the Sonoma products for Life brand in 2016, and the brand alone is worth over a billion dollars in clothing and home products. Additionally, Kohl’s has acquired the sole retail rights to well-known brands including Mudd Jeans and Candie’s.
Kohl’s and beauty shop Sephora struck an agreement in 2021 that allowed Sephora to open outlets inside of some Kohl’s locations. This is an attempt to replace their internal beauty pick.
A single aisle rounds the whole store in Kohl’s “racetrack” layout, which is a pattern taken from budget retailers.

Battling the tide

The largest department store chain in the US is Kohl’s, with over 1,100 locations and $19 billion in sales annually.
For years, the department store industry has been experiencing a structural decline due to competition from Amazon, expanding big-box chains like Walmart (WMT) and Target (TGT), and low-cost retailers like TJMaxx. In recent times, numerous companies have declared bankruptcy, including Sears, JCPenney, Neiman Marcus, Barney’s, and several others.
According to John Fisher, a senior lecturer at Boston College’s Carroll School of Management and the former CEO of Saucony running shoes, department stores like Kohl’s have been undercut on costs by cheap players at the bottom and on prestige by luxury businesses at the top.
Being different is difficult, Fisher remarked. “I believe that death is currently catching Kohl’s in the middle.”
According to UBS, Kohl’s has lost about 17% of its market share since 2011, mostly to discount stores like TJMaxx and Amazon.
According to a recent research by UBS analyst Jay Sole, “[F]orces like consumers’ migration to online and preference for value have contributed to this erosion.” “This probably won’t stop after the pandemic.”


After taking over as Kohl’s CEO in 2018, Gass—a former top deputy to Howard Schultz at Starbucks (SBUX)—tried a few different strategies to entice consumers and fend off rivals.
Kohl’s extended its athleisure gear business with labels including Nike (NKE) and Under Armour (UA) in addition to its agreement with Amazon for returns. In an effort to appeal to Millennials more, Kohl’s also downsized a few of its locations and leased the excess space to Aldi and Planet Fitness. More recently, Sephora beauty outlets were opened within Kohl’s.
Significant advancements have not resulted from these tactics. While Kohl’s has made progress in other areas, particularly with athleisure, its womenswear division has suffered.
Sales increased by 0.7% in 2018 over the previous year. They fell 1.2% in 2019 and then saw a 20% hit in 2020 as a result of Covid-19 limits and store closures.
Sales increased by 23% last year once businesses reopened and customers updated their outfits, although they were still lower than before the outbreak.
In the four years since Gass took control, the competition has grown more ruthless, and according to Neil Saunders, managing director of retail at GlobalData, “a lot of Kohl’s stores feel tired.” Customers have found it quite simple to go from Kohl’s to other stores that have superior products.
Furthermore, he said, brand alliances like Sephora and Amazon do not deal with fundamental problems. “Kohl’s should focus on strengthening its own brand instead of depending on outsiders to do so.”

An impending sale?

Activist investors have been putting pressure on Kohl’s to make adjustments over the past few months.
One company, Engine Capital, suggested that Kohl’s either find a buyer to take the company private or split off its e-commerce operations from its physical locations. In December, Engine Capital stated, “Even the most patient long-term shareholders cannot be expected to endure the punishing underperformance and perpetual value disconnect seen at Kohl’s.”
After a month, Macellum Advisors announced that Kohl’s leadership and board had “spent another year materially mismanaging the business,” and as a result, the firm will be proposing a group of new board members. Kohl’s also received acquisition approaches from private equity companies, which the business turned down.
Kohl’s announced plans for a “complete reinvention of our business model and our brand” at an investor day last week in an attempt to defy criticism.
Coupons are distributed by J.C. Penney staff to customers who are in line on Thanksgiving Day, November 23, 2017, in Hyattsville, Maryland. Kohl’s said that it would expand its popular Kohl’s Cash rewards program to 7.5% on purchases, up from 5%, and add Sephora mini-shops to about 75% of its 1,100 US sites. In addition, the company plans to create 100 new locations in the next four years that will be half the size of its typical outlets. Additionally, Kohl’s revealed additional plans for expanding online, such as self-service for order pickup and return processing.”We’re changing from being a department store to a lifestyle brand that is more narrowly focused.
Duskin at Macellum Advisors, however, found the idea to be “disappointing.”
He says it’s time for a new board and perhaps a new CEO because he doesn’t think the plan will significantly alter how customers view Kohl’s. He noted that Kohl’s has not made the most of its stores’ distance from conventional malls, which are seeing a decline in foot traffic, and he doubts if the expense of investing in Sephora was worthwhile.
In an indication of strong interest, Kohl’s announced last week that it has communicated with over 20 possible buyers for the business. According to a report by Axios on Wednesday, Saks Fifth Avenue’s owner, Hudson’s Bay Co., is also thinking about making an offer.
The Kohl’s board will evaluate any offers in comparison to its own and maintains a “continuous dialogue with potential bidders.”

Kohl’s Business Strategy: Promoting Future Growth

An update on Kohl’s plan to spur development and establish itself as the go-to retailer for Active and Casual consumers was given in March 2022. This will position the company for sustained profitable growth and a robust return to shareholders.
With a distinct market niche in retail, Kohl’s is transitioning from being a department store to a more focused lifestyle brand that revolves around the Active & Casual lifestyle. Due to the company’s efforts in both its solid internet business and its strong base of off-mall stores, it has emerged as an omnichannel leader.
Kohl’s keeps leveraging its omnichannel strength and forging strong alliances that are exclusive to the sector. Launched in 2021, the new relationship with Sephora is expected to grow to a $2 billion business, while millions of new customers are being brought in by the partnership with Amazon. Additionally, Kohl’s is still positioned as a top destination for products that consumers like thanks to its continued collaborations with well-known national brands.
In addition to accelerating expansion, the company is extending its reach by preparing to open 100 new small-format stores over the course of the next few years. To better serve our customers, Kohl’s is also promoting a data-centric strategy and making extra efforts to strengthen its data-science capabilities.

REFERENCES

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