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Kohl's Seeks Clarity in Home

Kohl's brought analysts to this rapidly growing city north of Indianapolis in early October to show off its latest prototype — amidst a record-breaking day of 80 store openings — the bulk of 95 stores the company will open this quarter.

The domestics department features an expanded number of display beds, part of Kohl's strategy to drive the home textiles business by emphasizing bed and bath. The new assortment aims for a better balance of designs, with a focus on updated and contemporary lines from Chaps, Daisy Fuentes and Simply Vera Vera Wang, executives said during the analyst meeting following the tour.

The new format brings more clarity and organization to the home department, executives of the 929-store chain said. Overall, the 88,000-square-foot format features expanded customer seating areas, fitting rooms with lounge areas, upgraded restrooms, a larger juniors department and a redesigned check-out area. Some stores also feature glass storefront entrances with showcase window displays.

In other initiatives, Kohl's said it will pursue better operational values through continued use of reverse auctions, leveraged sourcing and increased emphasis on pre-process and in-process spot inspections. Kohl's is working to reduce the amount of time its designs go from concept to store shelf, aiming for narrowing the window from an average of 40 weeks to 30 weeks. Programs run through CAFTA countries — largely apparel — might even be cycled through in eight to 10 weeks, said Peggy Eskenasi executive vp - product development.

By 2012, Kohl's plans to operate 1,400 stores in the United States, said chairman and ceo Larry Montgomery. Other initiatives from now through 2012 include:

  • Comparable store sales are expected to grow 2% to 4% annually.

  • Total sales growth is expected to be 9% to 11% on a compound annual growth rate (CAGR) basis from $15.5 billion in 2006 through 2012.

  • Operating margin is expected to be 13% to 13.5% by 2012.

  • Earnings per share are expected to grow 15% to 17% on a CAGR basis from $3.31 in 2006 through 2012.

  • Capital expenditures are expected to be $1.6 to $1.7 billion annually with continual investment in new stores, remodels, technology and merchandise presentation.

  • Free cash flow is expected to see continued annual improvement, reaching $1.2 to $1.4 billion by 2012.

  • Return on invested capital is expected to be 14% by 2012.

This fall Kohl's enters its 47th state with its debut in Wyoming. Stores are opening in 13 new markets including Spokane, Wash.; Panama City and West Palm Beach, Fla.; Abilene, Texas and Cheyenne, Wyo.

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