QUOTE AND NEWS
Motley Fool  Jun 21  Comment 
Sometimes it's not worth stretching for a market-thumping yield.
Motley Fool  Jun 14  Comment 
Macy's may be a retailer, but the value is in its real estate.
Motley Fool  Jun 2  Comment 
Macy's, Nordstrom, J.C. Penney, and Kohl's disappointed investors last month.
MarketWatch  May 23  Comment 
A woman wears a Chewbacca mask and airs a Facebook Live video of her laughing while putting it on. It’s now Facebook’s biggest live video hit to date.
Motley Fool  May 21  Comment 
Department stores' inventory woes are fueling the continued rise of off-price retailers.
Forbes  May 20  Comment 
Just as quickly as 54.2 million people watched the clip, Kohl?s sold out of that mask online.
Motley Fool  May 19  Comment 
Kohl's is struggling to find its way in a new no-growth environment.




 

Kohl’s (NYSE: KSS) is a U.S. department store chain that sells a mix of items including men's and women's apparel, home decor, and accessories. The department store appeals to middle-class consumers by selling discounted branded and private label clothing and home goods. Kohl's is in the same category of national department store competitors such as J.C. Penney (JCP) and Macy's Inc. (M).

Kohl's is vulnerable to a weak U.S. economy and declining consumer spending because the company has no stores outside of the US and does not have an international presence to serve as a buffer to fluctuations in the US economy. However, Kohl's discounted pricing allows it to ride out tough economic times better than its competitors.

Company Overview

Business Financials

Kohl’s operates specialty department stores and an e-commerce site in the United States that sell moderately-priced branded and private label merchandise.

Business Segments

Kohl's reports its sales in six different business segments:

  • Women's (32% o
  • Home (18% of net sales)
  • Children's (13% of net sales)
  • Accessories (10% of net sales)
  • Footwear (8% of net sales)

Kohl's stores and e-commerce site carries a variety of clothing, accessories and home goods. The company's merchandise offerings include products from branded manufacturers, such as Nike, in addition to exclusive and [[private labr Vera Wang and the Chaps brand that Kohl's offers exclusively from Polo Ralph Lauren (RL).

Business Growth

FY2010 (ended January 30, 2011)[1]

  • Net sales increased 7.1% to $18.4 billion.
  • Net income increased 12.4% to $1.1 billion.

Trends and Forces

Growing Kohl's Exclusive and Private Brands

Exclusive and private label merchandise account for almost half of Kohl's sales, a figure Kohl's has worked to increase by adding new exclusive brands like Helix, Mudd, Dana Buchman, and Hang Ten.

Department stores are increasingly seeking to distinguish themselves and earn higher profit margins by offering exclusive brands and private label brands. Exclusive brands are brands marketed under the wholesaler's name that are sold only in a particular chain; one exclusive brand at Kohl's is the Chaps line by Polo Ralph Lauren (RL). Private label brands are produced by wholesalers, but sold under the brand name of the retailer. Exclusive brands such as Simply Vera by fashion designer Vera Wang, can help draw customers into Kohl's stores, as the products can only be found at Kohl's. Kohl's own private label products are typically priced lower than branded merchandise, but have a higher profit margin for Kohl's as the retailer is able to receive the good at a lower cost by avoiding branded manufacturers.

Higher Raw Materials Costs May Force An Increase In Clothing Prices

In a recovering economy, the last thing that consumers want is higher prices, especially on necessities like clothing. Many in the fashion industry are expecting price increases of as much as $2 for a t-shirt. As consumers ease back into discretionary spending, higher clothing prices delay the recovery as they discourage spending. Companies like Kohl's rely on consumers spending money on clothes, and if higher prices discourage consumer spending, the company's bottom line will suffer due to these significant factors. blab

Competition

Kohl’s is one of the smallest national department store retailers. It competes primarily against other department stores, but also is facing increasing competition from discounters and mass merchandisers like Target (TGT) and Wal-Mart (WMT) as these companies grow their clothing and home goods categories.

Kohl's primary competitors are moderate-priced department stores, J.C. Penney (JCP), Macy's Inc. (M) and Sears Holdings (SHLD). Kohl's main points of differentiation from these other companies is Kohl's usage of the off-mall store model and low prices. These factors have played key roles in Kohl's ability to cope with recessionary environment while its competitors have lost more sales than Kohl's as shoppers trade down and visit malls less frequently.

References

  1. KSS 2010 10-K pg. 13
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