Kohl’s Makes Big Push in California
Kohl’s had to feel pretty good about the purchase price when it bought up 30 stores in California last year from the defunct Mervyns’ department store chain. But, buying cheap was just one part of the equation for Kohl’s, which will soon find itself under pressure to drive sales in a state marked with high unemployment. The addition of the new units will bring Kohl’s store count to 121 in the state.
"The moderate-income consumer is feeling the pinch," Richard Jaffe, a retail analyst with Stifel, Nicolaus & Co, told the Los Angeles Times. "If you’re a two-income household earning $50,000 a year and now it’s a one-income household earning $25,000 a year, you’re not shopping. The money isn’t there."
Kohl’s CEO Kevin Mansell said the opportunity to rapidly expand by purchasing the former Mervyns made absolute sense even in light of California’s economy. "We see this as a great opportunity to actually go the other way," he said. "Let’s take advantage of other people’s weakness; in fact, let’s get aggressive."
Mr. Mansell believes he is being realistic about the challenges his chain will face.
"Does Kohl’s think the consumer is more open to spend? No," he said. "But that doesn’t mean we can’t be very successful. It just means more and more of our business will come at the expense of others."
Discussion Questions: Bottom line, will the addition of 30 new stores in California help or hinder Kohl’s? If consumer purchases are not likely to take a sudden jump in the state, from whom will Kohl’s grab share?