Kohl's (KSS)

As the economy continues to recover from the recession, middle class retailers like Kohl's are poised to benefit. During tough economic times, middle class and aspiring lower class consumers left stores like Kohl's in favor of stores like Wal-Mart in order to get the most value for their dollar. However, as the economy improves, these consumers are more likely to trade in monetary value for higher quality items and start shopping at places like Kohl's again. In the first three quarters of 2010, Kohl's has had increasing revenue growth as a result of this trend. In 2011, the company plans to open 40 new stores, compared to the 30 that it had originally planned at the beginning of the year, an indication that Kohl's is expecting strong growth in 2011.

At the beginning of October 2010, Kohl's announced that it planned to hire 40,000 employees for the upcoming holiday season, a 21% increase from the 33,000 employees the company hired last year. This averages out to about 35 employees for each of Kohl's 1,089 stores. The increase in holiday hiring numbers could mean that Kohl's is expecting increased store traffic and thus more revenue as a result of the rebounding economy.

Kohl's offers a variety of private label merchandise including Helix, Mudd, Dana Buchman, and the Chaps line by Polo Ralph Lauren. These exclusive brands, meaning they can only be found at Kohl's, are important for driving traffic into stores and from distinguishing itself from competitors. So if a consumer really likes a particular brand that is only available at Kohl's, then the consumer will have to go back to the store to buy more. As a result, Kohl's has placed an emphasis on growing the percentage of its sales that come from these brands, and has done so relatively successfully. In 2008, these private label brands accounted for 42% of net sales, and grew to 44.3% in 2009. In Q2 2010, they accounted for 49.1% of net sales. The success that Kohl's has had with private label brands puts the company in an excellent position for growth.

Pressured by the economic downturn and the weak retail environment, KSS has announced that it would offer large price cuts to attract bargain shoppers the day after Thanksgiving and during the holiday season. Larger price cuts would allow KSS to compete more with large discount retailers such as Wal-Mart and be more attractive to consumers looking to cut costs this holiday season.

Kohl’s recovery from the 2003 inventory mishap conveys its ability to tackle challenges as margins have imporved since.

Consumer’s shift from traditional mall based department stores to specialty department stores such as Kohl’s have increased foot traffic and store openings.