• Andrea Lillo

Full speed ahead for Kohl's

MILWAUKEE — With 35 percent sales growth and a 20 to 25 percent increase in its store base within the past year, Kohl's — only a 79-store chain in the Midwest in 1992 — is on the road to nationwide expansion.

"We're just beginning our growth," said Larry Montgomery, ceo, at Kohl's annual meeting here last week. "The concept has proven to be successful in every market we've entered."

At the end of 2000, the company had 320 locations in 26 states, including expansion into lucrative markets, such as the Tri-State region. The plan now is to keep growing its square footage 20 percent annually, Montgomery said, in both existing and new markets.

"Our focus now is to drive market share and widen the gap between competitors," said Arlene Meier, coo. Kohl's is clearly the leader in comparable-sales growth, for example. Kohl's achieved an increase of 9.0 percent in comp-store sales for 2000, she said, while its direct competitors have fallen well short with their same-store figures. The retailers that came the closest include Federated at 2.9 percent, May at 2.9 percent, Sears at 2.7 percent and Dillards at 1.0 percent, Meier said. Kohl's remains in front even when compared with the fastest growing retailers, she said. Wal-Mart achieved a 6.8 percent increase in comp-store sales last year, while Gap had 6.0 percent and Target 5.6 percent.

In addition, Kohl's went from being a $1 billion company in 1992, she said, and now nets more than $6 billion. Its net sales per selling foot was $281 in 2000, a 4.1 percent increase from 1999.

In 2001, 62 stores are slated to open, and 70 more will be added in 2002. "We have a huge opportunity for growth," said Montgomery. The Midwest region, where Kohl's had the 79 original locations, holds 50 percent of the company's store base, with 163 locations at the end of 2000, and another 13 scheduled to open this year.

The mid-Atlantic region, "a top-performing region," said Kevin Mansell, president, is 15 percent of Kohl's store base. Meanwhile, the south central region, also 15 percent of the store base, will include new markets this year, such as Austin and El Paso, TX, and in 2002, Houston. The southeast region, 10 percent of the store base, will include the Atlanta market this spring with 15 stores, and another three to open this fall.

Thanks to an earlier purchase of 15 former Bradlees locations, Kohl's will break into the Boston area in 2002 with 12 locations. The three remaining Bradlees locations will be fill-in stores in New Jersey.

The years 2003 and 2004 will mark Kohl's major expansion into California, Arizona and Nevada, with "critical mass" in the Los Angeles area in spring 2003.

To support all of these new locations, Kohl's has plans to add three new distribution centers to its existing four. A DC in Mamakating, NY, is currently under construction to service 100 stores. Kohl's is also planning to open a former Wards facility outside of Dallas that will be able to serve 40 to 50 stores, with the ability to be expanded. The company is also in the process of identifying a DC to handle the future locations in the Southwest.

The typical Kohl's prototype is 86,500 square feet, said Montgomery, and that's the size it wants to work with. The company wouldn't consider enlarging that footprint if it seemed like a location called for it, he said, but would instead consider opening another nearby Kohl's location.

The retailer's primary advertising medium is print, and Kohl's pushes more than 18.5 million full-color inserts every week, Mansell said. However, TV and radio are also effective ways to reach customers, he added. Radio is becoming especially important in markets with long drive times, he said, like New York and Washington.

Since almost 80 percent of its business is brands, said Mansell, Kohl's plans to drastically expand its Get It program, adding 50 percent more items. Presently, the program includes advertised specials for primarily apparel products, under Kohl's private labels. This fall, however, in time for Back-to-School, the Get It program will include extensive involvement from all six of its businesses, including the home area, and brand names as well. The program will also have new visuals. "The customer will walk into the store and understand the program," Mansell said.

The home department, which makes up almost 20 percent of Kohl's sales, received a remodeled look this spring with the debut of the Atlanta stores, with a more unified approach to merchandise, and will be in all new stores going forward. "We clustered the merchandise the way the customers shop," said Mansell. The new layouts also include a back wall presentation that demonstrates to the customer the depth of the program.

After the meeting, Jack Moore, executive vp, gmm, said that the new layouts were performing well, though the company is still working out a few kinks with fixturing and such. The old departments were too fragmented and held too many fixtures, he said, and the newer layouts solve those problems. Domestics are about 40 percent of the home department. "Home is very important to us," he said, though he declined to talk about the possible addition of new brands.

Kohl's executives also spoke about the launching of the e-commerce site early this fall. Treated as another Kohl's location, the site is undergoing a testing phase right now, said Mansell. To service the Internet business, the company opened a 500,000-square-foot fulfillment center in Ohio this past March. The initial rollout will consist of key items, said Mansell, and the assortment will broaden in time.

Montgomery was also ready to talk about the future, predicting that Christmas 2001 will be "great."

He added, "We're the best performer out there. And we continue to outperform brand-name retailers out there."

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