On the eve of the pandemic outbreak in mid-March, Kohls had a new turnaround plan he wanted to present to Wall Street that he hoped would shake years of stagnation for good.
The COVID-19 outbreak, which forced Kohls to close its stores for weeks, thwarted those plans and put the retailer on survival mode as sales fell 33% in the first half of the fiscal year.
Now that the business has stabilized – albeit far from returning to pre-pandemic levels – Kohls reveals his plan to move it away from the fashion where it stumbled and into active clothing. The plan also calls for Kohls to rely more on national brands like Nike and TOMS, as well as newer partners like Lands & # 39; End and Cole Haan, and to ditch many of its private label brands.
Kohl's business and brand will look and feel different, "Kohl's CEO Michelle Gass told Fortune. "Active and casual will be the focus."
Clothing spending was one of the biggest victims of the pandemic. Protecting Kohls from the worst piece of clothing that affects other department stores and specialty clothing chains is active clothing from brands like Nike, Under Armor and Adidas. Kohls wisely placed a big bet on athletic apparel after Gass joined Kohl & # 39; s in 2013. This category now generates 20% of Kohl's sales and Gass believes that can reach 30%.
While COVID-19 is the business of many Kohl's rivals – particularly the bankruptcy of J.C. Penney at a mall and the decimation of Macy's – got a grip on other competitors, which put pressure on Kohls to finally return to growth.
95% of doing business outside of malls helped avoid the Penney and Macy havoc. However, as a mall-based chain, Kohl & # 39; s competes against very strong competitors in Target, Ulta Beauty, Dick & # 39; s Sporting Goods, and T.J. Maxx.
Gap Inc's Old Navy chain, which competes directly with Kohls for business for young American mothers, among others, saw a much smaller drop in sales than Kohls, while Target saw sales of apparel and housewares rise.
And this has forced Kohls to rethink its merchandise strategy and what makes it attractive to buyers. While Kohls isn't the only one selling sports, he has carved out a niche by focusing on items like this for the whole family, not just women. "We can own this space," says Gass. Kohls is also testing new ideas like personal care products in 50 stores. "It may or may not work – we are really pushing the boundaries of our active and casual lifestyle," adds Gass.
For years, Kohl has relied heavily on private labels that offer higher profit margins, more control and, ideally, something that customers want – but cannot go anywhere else. Kohl's problem is that too many of his private labels are stale, especially when it comes to clothing. That weakness is in stark contrast to Target's remarkable ability to quickly launch new brands that consumers will flock to.
Kohl's has thrown eight of its exclusive brands, including JLO, Rock & Republic and Dana Buchman, overboard with further exits so far, though it has lined up more national brands like Lands & # 39; End and Cole Haan. The retailer now generates 37% of sales with its exclusive brands in apparel and other categories, compared to more than half a few years ago. "We will be more focused," said Gass about the peeling of brands.
Kohls has been trying to become a serious player in the beauty business for years after making it to Macy & # 39; s and J.C. Penney has ceded the Sephora stores. In fact, building a sizeable beauty was a lynchpin of Kohl's "Greatness Agenda" in 2014. The company hoped that beauty would rise from 2% of sales to 5% in the short term, supported by so-called "Beauty Concierges". While Kohl's strength has shown in fragrance, the beauty did not deliver the benefit the company planned as it faced stiff competition from neighbors Target and Ulta Beauty and, to a lesser extent, CVS and Walgreens.
Kohl & # 39; s is now planning beauty salons three times the size of the current ones that are staffed with beauty consultants. The category is crucial in solving a puzzle that has occupied Kohls for years: how to get more shoppers to come to the store and pamper themselves instead of just coming in and out of the store for a short while.
A big part of his plan is to keep growing the e-commerce business. Online shopping, which accounted for nearly a quarter of pre-pandemic sales, rose as much as 40% at the height of the pandemic. Ultimately, it is expected to settle somewhere in the middle of these two percentages.
In the store, Kohl & # 39; s will reduce its range within some brands by up to 40%. The range of handbags, fine jewelry and men's suits will be reduced – areas where sales have declined – and room will be made to increase inventory of healthier categories.
"That gives us the flexibility to lean into growth categories, test, learn, iterate – kill what doesn't work, scale what is," says Gass. And hopefully finally achieve this long elusive growth.
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