Kohl's increases its efforts to highlight dept. store labels - market share growth strategy - Brief Article - Statistical Data Included

DSN Retailing Today, March 25, 2002 by Mike Duff

MENOMONEE FALLS, WIS. -- Kohl's intentions of grabbing market share from the ailing department store segment have been a success so far, and now the company intends to turn up the heat. In a conference call on March 5, Kohl's executives outlined initiatives that helped build market share and propel it to significant gains in sales, earnings and comps for the fourth quarter and fiscal year. They included:

* key initiatives to increase brands;

* merchandising efforts, including a "Table and Tower" program, to boost the profile of traditional department store labels;

* marketing endeavors designed to integrate advertising with point-of-purchase efforts.

Analysts participating in the conference call went as far as questioning Kohl's executives about their responsibility for driving department stores to scale back inventory commitments. While the executives refused to speculate on this possibility, clearly analysts feel as if Kohl's initiatives are having a substantive impact on department stores.

Approaching the fourth quarter, Kohl's made a decision to go after vulnerable competitors and celebrated success in the conference call.

"We were prepared to market aggressively in the fourth quarter, and our focus was to increase market share and drive customer traffic," said coo Arlene Meier. "As a result, we saw increases in average transactions and customer traffic. In addition, we indicated that we saw an opportunity to grow sales in all merchandise areas, which we did achieve."

Kevin Mansell, Kohl's president, said that from a sales perspective, Kohl's was pleased with both the quarter and year. "All of our regions performed well, and all of our six major merchandising categories contributed to the increase," he said.

In the quarter, Kohl's bolstered its "Get It" key product program across the store, with a boost in national brand exposure, and expanded its "Table and Tower" program to include the entire store. "This included our holiday 'Make the Season Bright' program, where there was a very large increase in apparel penetration, and a new post-holiday program that was focused on basics," Mansell said.

In addition to tightening the bonds with merchandising, Kohl's marketing efforts include boosting the productivity of its key marketing vehicles: print, broadcast and direct mail. "We also continued to focus on a higher penetration of broadcast to our total ad expenditure," he said. "Included in that was a launch of national cable in the fall season."

Kohl's remains aggressive as spring approaches, building on the programs that were successful in the fourth quarter. "There has been strong early selling on a number of initiatives that are key to us for spring," said Mansell.

In the "Get It" program, Kohl's has added more apparel items even as it has expanded the campaign. Another merchandising initiative, "More Ways to Renew," highlighting spring colors in apparel, home and accessories, is off to a strong start, Mansell said.

As for merchandising segments, capris, tanks, shorts and tees are selling well, with capris and tanks particularly strong. The reintroduction of Oshkosh has exceeded plans, he added.

Daniel Barry, a Merrill Lynch analyst, pointed out in a research note that Kohl's various initiatives had paid off even though the overall selling environment was lackluster. He told DSN Retailing Today Kohl's success "certainly" was based in part on merchandising initiatives, but those were "not the only things. They were a little more promotional, they brought in some very good product lines, most notably Columbia and Oshkosh, and they continue to execute in an outstanding manner."

In the fourth quarter, Kohl's sales grew 22.5% to $2.72 billion from $2.22 billion an annum earlier. Same store sales gained 10.1%. Net income gained 31% to $233.8 million, or $0.68 per diluted share, versus $178.5 million, or $0.52 per diluted share, a year earlier.

Sales for the fiscal year ended Feb. 2, 2002, increased 21.7% to $7.49 billion from $6.15 billion a year earlier. Comps gained 6.8%. Net income increased 33.2% to $495.7 million, or $1.45 per diluted share, versus $372.1 million, or $1.10 per diluted share, for the earlier annum.

Kohl's plans to increase the number of stores it will open in the current fiscal year. The company will open about 70 new stores in 2002 versus 62 in the last annum, having entering the Houston market with 12 stores this month. The company plans to debut in the Boston market next month with 13 stores and the Nashville market with four stores. Kohl's also plans to add two more stores in Dallas and one store each in Rocky Point, Walkill and Brewster, N.Y.; Clifton and Ramsey, N.J.; Huntsville, Ala.; and Indianapolis.