April 17, 2007
Montgomery (Kohl’s CEO) in the Middle
Larry Montgomery, chairman and chief executive officer of Kohl’s, has his company positioned squarely in the middle between discounters on one end and upscale department stores on the other, and that’s exactly where he wants to be.
In an interview with The Wall Street Journal, Mr. Montgomery said, “On the lower end, Target has done a great job of owning that discount business; [meanwhile,] a lot of the traditional department stores have spent the last five or six years in a consolidation mode, and the better guys like Nordstrom and Neiman Marcus Group have just done a great job with content on a much higher level. It has created a huge opportunity for us. Our locations have made us the neighborhood guy — being located in strip centers and power centers [shopping hubs that have a grocery store and national retailers]. It is much more convenient for the customer to come and shop for their family and their home with us than ever before.”
Mr. Montgomery is looking to build on the opportunity he sees by continuing to focus on Kohl’s core strengths of offering mid-tier designer brands while broadening its appeal to new consumers with exclusive lines from Vera Wang, Elle magazine, Candies and others.
“The customer wants the quality, wants the fashion and wants the contemporary and updated styling,” he said. “But they want to make sure that we are keeping the value equation there [by keeping prices below typical department-store levels].”
Kohl’s has also been investing in improving the shopping experience of customers.
“In October, we opened up a number of ‘innovation’ stores. We started with the whole look of the building — we put some windows up front, created a bigger opening and brought more light in…When you come in to the store, we created a merchandising area for lines like Candies, and Chaps and Tony Hawk…From a fixture point of view, we are much more upscale than we have been in the past. The lighting is a little different. We’ve created a bank of fitting rooms that probably is as nice as you are going to find, certainly in any moderate department store,” he said.
Discussion Questions: What is your assessment of Kohl’s strategy? Where do you see the greatest opportunities for the chain to improve its top and bottom line performance?
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Kohl’s represents a terrific example of a business model that is working as planned. Unlike other retailers who continually tinker with their value proposition or try to become something that they are not adequately prepared to become, Kohl’s has “stuck to its knitting,” and has achieved tremendous success. I credit Mr. Montgomery for his thoughtful, controlled growth and his incredible ability to keep his eye on the ball. I am bullish on their continued success and feel they have a winning formula for many years to come.
Kohl’s strength (as well as Target’s and J.C. Penney’s) in my opinion is that it is not Macy’s. Macy’s takeover and obliteration of May nameplates and brands put a lot of shopper loyalties into play, particularly in the Midwest where the perception of Macy’s (rightfully so) is high prices and low quality. The tide of customers leaving the former May stores is raising all ships, whether Kohl’s and Target or Nordstrom and Saks. All Kohl’s has to do is keep its brands familiar, keep its prices affordable and keep its merchandise quality and shopping experience good enough to generate value for its customers.
Johnny-come-lately,
The new kid in town,
Everybody loves you,
So don’t let them down….
They will never forget you till somebody new comes along.
If there’s ultimately to be a problem–and one shouldn’t ignore the “if”–I think it will be that Kohl’s doesn’t really have an image: currently it’s “new” and “different;” but those are self-liquidating qualities, and beyond those, I can’t envision loyalty or tradition…or any other particular competitive advantage: it could be the Mervyn’s of the 2000s. It’s also in a curious position; at $15B in sales–much larger than I had realized–it’s now much too big to be nimble and trendy, yet (probably) still too small to fend off an expansion of Target’s fashion/soft goods lines.
Kohl’s is my favorite place to go for clothes and shoes, as well as for nice bed & bath. The sales are always good, and the quality of the merchandise is excellent. Good for them!
Kohl’s has done a great job of communicating the promise of their brand and fulfilling it inside of the store. You don’t go there for top of the line, you go there for affordable, attractive, trendy indulgences. They have just enough product selection to find something fun, but not too many so that it’s an overwhelming experience. The entire family can go in and break off to find “their thing” and there’s always some bargain inside to surprise and delight you.
I actually like their sub-brand strategy, as the Daisy Fuentes line is cute and on-trend and the Candies brand offers a unique product line. They’ve also been smart and offered these unique lines in petites and plus sizes. Personally, I admire what they’ve accomplished and look forward to seeing what’s next!
As has been noted, the death of low-moderate and moderate traditional department store chains has left a vacuum in the market. During the “dying off” phase of this cycle, Kohl’s became the primary beneficiary of these unserved customers. The merchandise strategy was well suited to meet these needs, and the stores well designed. Comp store results were extraordinary, and for a time, Kohl’s became the retailer other retailers used as a metric for success. Today, Target has successfully repositioned to attract the moderate to low-moderate shopper, and J.C. Penney has completely reinvented itself with outstanding success. The cycle turns, and JCP and Target are the retail success barometers.
Kohl’s use of exclusive designer derivatives and brand extensions carries risk, and I think, is missing something truly important. The main brand message should be Kohl’s. Not Vera Wang, or Candies or Tony Hawk. Kohl’s. Both Target and JCP have been successful at building a retail brand umbrella, under which the exclusive product lines can and are marketed. The benefit is that if any one sub-brand fails to remain connected with the consumer, it can be de-emphasized or phased out without damage to the umbrella brand. The marketing I’ve seen for Kohl’s features the sub-brand. What happens if the talent behind the product development for Candies misses the mark? (And they will…everyone does from time to time.)
My suggestion for top line improvement is to have more public clarity around the brand positioning of “Kohl’s”…build that brand, enhance that brand, and be different from JCP and Target.
Larry Montgomery, chairman and chief executive officer of Kohl’s, has his company positioned extremely well right in the middle between discounters and mid to upscale department stores. This has been accomplished by offering this middle minded consumer almost exactly what she or he respond to best including middle brands at every day low prices, ample inventory and variety, relatively fast checkouts, convenient parking, and lucrative savings when using the Kohl’s credit card. I admire what Kohl’s is doing because it is following its own plan and resisting the temptations to be anything else other than exactly what it is, and doing so very well.
As Target has positioned itself slightly above Kohl’s, Kohl’s continues to build its brand’s market strength and equity. And, the smallest or meaningful difference between Kohl’s and Target has created profitable brand loyalty for both retailers.
As you build brand strength, i.e.: equity (that the other five points in the survey support), you will note greater distinction between Kohl’s and the more upscale department stores (like Macy’s), and the mass merchandisers.
What a great market position, for Kohl’s to be in! Hmmmmmmmmmmm
Target as well!
Bravo to Kohl’s, they are doing an excellent job of wooing the consumer. Attractive, inviting and clean stores with helpful and courteous associates. Kohl’s has also targeted the disposable income of baby boomers with a senior citizen’s day offering an additional 15% off. Wise draw-in because these consumers are always looking for bargains.
They can certainly improve on their online venture and gain market share in that respect. Also, their supply chain can be improved greatly – many times the shelves are bare. You can’t sell it if the product is not there, plus over time that could damage the results of repeat customers.
The numbers tell the story. Same store sales for Kohl’s were +4.1% in the most recent quarter and +8.5% in the prior quarter. Not too long ago, some industry observers predicted the end of the department store. Any resurgence in this segment must be credited to the team at Kohl’s who has been creative and energetic in the face of the gloomsayers.
Kohl’s stores reflect that same creativity and energy. Consumers don’t go to these outlets as often as they go to grocery or drug stores. The department store’s opportunity: offer a mix of new and exciting fashions blended on top of a value price consistency. When it’s time to buy a new pair of jeans, shoppers might actually look forward to a trip to Kohl’s.
As Department stores rebound and flee the middle, Kohl’s does have an opportunity to gain share in the mid-market. To do so, they’re going to have to balance their price impression with their exclusive lines. In the past, they have tended to focus too much on price, in effect, creating comparisons with discounters.
Kohl’s stock is around $78. A year ago it was $54 and 2 years ago it was $50. But 5 years ago it was $75. Investors like what Kohl’s has done lately. Let’s see if Kohl’s can further improve its performance, getting its stock to grow well beyond its price 5 years ago. Consistent growth in retailing isn’t easy. Many retailers exhibit cyclical improvement instead.
Kohl’s has attractive, neat, well merchandised stores with sensible layout, great value and interesting private labels. They offer decent customer service and are convenient for their customers, as an off mall retailer.
For the time being, they, along with Target and an increasingly impressive and improving JCPenney, are the ones to watch and look to for return and success in the difficult and challenging middle market.
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Kohl’s represents a terrific example of a business model that is working as planned. Unlike other retailers who continually tinker with their value proposition or try to become something that they are not adequately prepared to become, Kohl’s has “stuck to its knitting,” and has achieved tremendous success. I credit Mr. Montgomery for his thoughtful, controlled growth and his incredible ability to keep his eye on the ball. I am bullish on their continued success and feel they have a winning formula for many years to come.
Kohl’s strength (as well as Target’s and J.C. Penney’s) in my opinion is that it is not Macy’s. Macy’s takeover and obliteration of May nameplates and brands put a lot of shopper loyalties into play, particularly in the Midwest where the perception of Macy’s (rightfully so) is high prices and low quality. The tide of customers leaving the former May stores is raising all ships, whether Kohl’s and Target or Nordstrom and Saks. All Kohl’s has to do is keep its brands familiar, keep its prices affordable and keep its merchandise quality and shopping experience good enough to generate value for its customers.
Johnny-come-lately,
The new kid in town,
Everybody loves you,
So don’t let them down….
They will never forget you till somebody new comes along.
If there’s ultimately to be a problem–and one shouldn’t ignore the “if”–I think it will be that Kohl’s doesn’t really have an image: currently it’s “new” and “different;” but those are self-liquidating qualities, and beyond those, I can’t envision loyalty or tradition…or any other particular competitive advantage: it could be the Mervyn’s of the 2000s. It’s also in a curious position; at $15B in sales–much larger than I had realized–it’s now much too big to be nimble and trendy, yet (probably) still too small to fend off an expansion of Target’s fashion/soft goods lines.
Kohl’s is my favorite place to go for clothes and shoes, as well as for nice bed & bath. The sales are always good, and the quality of the merchandise is excellent. Good for them!
Kohl’s has done a great job of communicating the promise of their brand and fulfilling it inside of the store. You don’t go there for top of the line, you go there for affordable, attractive, trendy indulgences. They have just enough product selection to find something fun, but not too many so that it’s an overwhelming experience. The entire family can go in and break off to find “their thing” and there’s always some bargain inside to surprise and delight you.
I actually like their sub-brand strategy, as the Daisy Fuentes line is cute and on-trend and the Candies brand offers a unique product line. They’ve also been smart and offered these unique lines in petites and plus sizes. Personally, I admire what they’ve accomplished and look forward to seeing what’s next!
As has been noted, the death of low-moderate and moderate traditional department store chains has left a vacuum in the market. During the “dying off” phase of this cycle, Kohl’s became the primary beneficiary of these unserved customers. The merchandise strategy was well suited to meet these needs, and the stores well designed. Comp store results were extraordinary, and for a time, Kohl’s became the retailer other retailers used as a metric for success. Today, Target has successfully repositioned to attract the moderate to low-moderate shopper, and J.C. Penney has completely reinvented itself with outstanding success. The cycle turns, and JCP and Target are the retail success barometers.
Kohl’s use of exclusive designer derivatives and brand extensions carries risk, and I think, is missing something truly important. The main brand message should be Kohl’s. Not Vera Wang, or Candies or Tony Hawk. Kohl’s. Both Target and JCP have been successful at building a retail brand umbrella, under which the exclusive product lines can and are marketed. The benefit is that if any one sub-brand fails to remain connected with the consumer, it can be de-emphasized or phased out without damage to the umbrella brand. The marketing I’ve seen for Kohl’s features the sub-brand. What happens if the talent behind the product development for Candies misses the mark? (And they will…everyone does from time to time.)
My suggestion for top line improvement is to have more public clarity around the brand positioning of “Kohl’s”…build that brand, enhance that brand, and be different from JCP and Target.
Larry Montgomery, chairman and chief executive officer of Kohl’s, has his company positioned extremely well right in the middle between discounters and mid to upscale department stores. This has been accomplished by offering this middle minded consumer almost exactly what she or he respond to best including middle brands at every day low prices, ample inventory and variety, relatively fast checkouts, convenient parking, and lucrative savings when using the Kohl’s credit card. I admire what Kohl’s is doing because it is following its own plan and resisting the temptations to be anything else other than exactly what it is, and doing so very well.
As Target has positioned itself slightly above Kohl’s, Kohl’s continues to build its brand’s market strength and equity. And, the smallest or meaningful difference between Kohl’s and Target has created profitable brand loyalty for both retailers.
As you build brand strength, i.e.: equity (that the other five points in the survey support), you will note greater distinction between Kohl’s and the more upscale department stores (like Macy’s), and the mass merchandisers.
What a great market position, for Kohl’s to be in! Hmmmmmmmmmmm
Target as well!
Bravo to Kohl’s, they are doing an excellent job of wooing the consumer. Attractive, inviting and clean stores with helpful and courteous associates. Kohl’s has also targeted the disposable income of baby boomers with a senior citizen’s day offering an additional 15% off. Wise draw-in because these consumers are always looking for bargains.
They can certainly improve on their online venture and gain market share in that respect. Also, their supply chain can be improved greatly – many times the shelves are bare. You can’t sell it if the product is not there, plus over time that could damage the results of repeat customers.
The numbers tell the story. Same store sales for Kohl’s were +4.1% in the most recent quarter and +8.5% in the prior quarter. Not too long ago, some industry observers predicted the end of the department store. Any resurgence in this segment must be credited to the team at Kohl’s who has been creative and energetic in the face of the gloomsayers.
Kohl’s stores reflect that same creativity and energy. Consumers don’t go to these outlets as often as they go to grocery or drug stores. The department store’s opportunity: offer a mix of new and exciting fashions blended on top of a value price consistency. When it’s time to buy a new pair of jeans, shoppers might actually look forward to a trip to Kohl’s.
As Department stores rebound and flee the middle, Kohl’s does have an opportunity to gain share in the mid-market. To do so, they’re going to have to balance their price impression with their exclusive lines. In the past, they have tended to focus too much on price, in effect, creating comparisons with discounters.
Kohl’s stock is around $78. A year ago it was $54 and 2 years ago it was $50. But 5 years ago it was $75. Investors like what Kohl’s has done lately. Let’s see if Kohl’s can further improve its performance, getting its stock to grow well beyond its price 5 years ago. Consistent growth in retailing isn’t easy. Many retailers exhibit cyclical improvement instead.
Kohl’s has attractive, neat, well merchandised stores with sensible layout, great value and interesting private labels. They offer decent customer service and are convenient for their customers, as an off mall retailer.
For the time being, they, along with Target and an increasingly impressive and improving JCPenney, are the ones to watch and look to for return and success in the difficult and challenging middle market.