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Kohl's, Target coexist profitably

So what will happen when rapidly expanding family lifestyle retailer Kohl's collides with style-conscious velocity retailer Target Stores in the lucrative retail mecca of California next year? The answer: sweet harmony.

That was the response from executives of both companies during their individual presentations at last week's Lehman Brothers Retail Seminar in New York. In fact, Kohl's and Target representatives said, the two formats serve as a great draw for one another.

"We coexist profitably with Kohl's," said Target Corp.'s Douglas Scovanner, cfo and executive vp, finance. "Sku overlap between Target and Kohl's is virtually nil. We pay far, far, far more attention to what Wal-Mart is up to than what Kohl's is up to."

Speaking at the conference a day later, Kohl's coo Arlene Meier concurred, saying that when the stores hunker down on a common pad it's a good match. "The customer shops Kohl's for apparel and home, then goes to Target for the basics, lawn & garden and other general purchases," she said.

The pair's views diverge on the competitive fate of Target Corp.'s less robust Meryvn's chain, which Meier described as "our closest look-alike competitor" and identified among a group of formats she said Kohl's snatches share from "on a day-by-day basis."

For Target's part, Scovanner characterized Mervyn's as a division on the rebound, pointing out that despite 2001's dismal retail environment, the chain turned in its best gross margin performance in a decade.

"I don't think Kohl's in California will upset that dynamic," he said.

Kohl's will enter the Los Angeles market in spring 2003 with an as-yet undisclosed number of stores and already has a 650,000 sq. ft. distribution center under construction in San Bernadino to support its expansion in the state.

Kohl's vs. Target vs. Mervyn's

Kohl's Target Stores Mervyn's
Source: Company reports, HTT research
Sales per sq. foot $283 $274 $188
Est. home textiles sales in 2001 (x000) $513 $1,985 $391

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