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?
Kohl’s recently has had a tremendous run on executing. Their marketing and promotion is consistent and they are doing a good job at staying top of mind in the customer’s world. Their merchandising, store design, distribution and experience are all getting positive marks. As long as they continue to execute they will reap the benefits from this purchase. The economy will turn around and they will be positioned well. It’s an investment in the future!
Kohl’s has a history of being successful in “Execution.” They are filling a void that Mervyns was not filling in these markets.
This will be a sharp win for Kohl’s during a holiday season that will see consumers doing some discerning shopping, starting their Christmas spending as early as pre-Halloween (40% of adults will kick it off then), and consumers seeking updated, and well-stocked merchandising in the aisles.
Thirty stores is nothing to this company. They have been used to growing fast for a long time. I used to have my doubts about Kohl’s. I love their stores but don’t see how they make any money. They are constantly sending me $25 gift cards in the mail and I buy off their 80%-90% off rack. I’ve got a closet full of clothes and I’ve hardly spent any of my own money there.
Kohl’s has a high probability of being successful. First, by purchasing these stores at a good price, stretches their capital investment. Simply more stores for the same investment dollars. While some stores may be close to existing stores, 100 plus stores is not too many in California based on population and cost of gasoline. Second, Kohl’s is a good operator. They have done this before. In the East, they bought up many Caldor stores and business is great. Third, Kohl’s merchandising works well in a down economy.
Kohl’s is on a roll when it comes to execution. Their store design is right. Their product mix is right. Their ration of branded products to corporate brands is correct. The way they treat their customer is dead-on. In summary, they are doing everything right.
Purchasing 30 Mervyn’s stores seems to be a no-brainer. Kohl’s will get this right as well. At this stage in their corporate life, no one should bet against Kohls. They very seldom stumble at this point, and they are great at staying 100% on strategy.
I live in NYC and, since there is no Kohl’s in Manhattan, I used one of their mailed discount coupons to buy a sport coat and slacks online. The slacks didn’t fit (ahem) so I took them along with me on a trip to Houston to see if I could exchange them. I wandered around an empty men’s department for 15 minutes looking for the right size with no luck. Nobody approached me to offer help. I left.
The following week I took both the coat and slacks with me to Milwaukee. Once again, no help, no luck. This time I walked to the Customer Service dept and returned everything. When I got back to NY, I went to Syms. Nice salesman, nicer suit.
This is not the first time I’ve been disappointed in Kohl’s service and selection. IME, I’ve found their stores to be understaffed and the store difficult to shop. I just don’t see them succeeding in a tough market like California.
This is an example of a market leader taking advantage of a significant opportunity during an economic downturn to take additional share and further strengthen their competitive position. This is a smart long-term strategic move.
Kohl’s is the retail “Darling” of the last decade and they continue in that mode. To their credit, they do execute expertly and they offer an assortment which every middle-class woman of America seems to want.
Their prices are good and their sale prices are difficult to impossible to resist. Their stores are neat and clean and well merchandised, to the point of being cluttered in some instances.
I also do NOT like the general layout that Kohl’s follows but their layout and store design are fairly uniform and works well for them and their customers.
They are an impressive and gently aggresive player in the industry and their competitors should not–and I believe do not–take them for granted. Mervyn’s they are Not! They are able to take on and compete against the likes of JCPenney and Macy’s, as well as TJMaxx and Marshall’s, and ALSO Target. They are successful at equaling or beating all of these competitors in many respects of the business–varying between price with sales, to assortment with their private labels as well as with their national brand offerings.
Former shoppers of Mervyns in California, I believe, will enjoy and come to rely on Kohl’s as a staple of their shopping habit.
You can’t argue with success. I believe that Kohl’s will do very well in their new markets/stores and will continue to do well everywhere else.