Kohl’s Annual Report
What Kohl’s Does Well
Kohl’s is one of the leading retailers in the country. It operates 1,022 department stores in 49 states with 39
stores expected to open this Fall. Customers can shop for merchandise online at kohls.com. It offers brands
that are private to Kohl’s and has also formed several partnerships with exclusive brands that are
recognized nationwide. Its retail consists of a large selection of apparel for men, women, and children in
classic to contemporary styles at a scaled range of prices. It also offers footwear, accessories and items for
the home. Fortune Magazine recently ranked Kohl’s as one of the top ten for “Best Breakaway Brands.”
Prior to the national economic decline, sales were on a steady rise, increasing from $10.3 billion in 2003 to
$16.5 billion in 2007. Overall, sales have increased 60 percent from 2003 to 2008. Kohl’s sales declined
only .5 percent from fiscal year 2007 to 2008 with an operating income of $1.5 billion, which was up from
$9.5million in 2003. From 2004 to 2008, the company’s stock price increased from $2.06 to $2.89 and its
ecommerce revenue from $241million in 2007 to $356 million in 2008.
Value Proposition
Kohl’s mission statement is “To be the leading family-focused, value-oriented specialty department store
offering exclusive and national brand merchandise to the customer in an environment that is convenient,
friendly, and exciting.” In 2005, the company’s approach to merchandising was redeveloped into a ninebox merchandising grid that defines brands according to consumer lifestyles and price tiers. Kohl’s prides
itself in consumer awareness and recognition and conducts extensive research to determine strengths in
categories such as price, quality and style of prospective brands as recognized by the consumer. Kohl’s has
partnered with internationally recognized brands like Vera Wang, Ralph Lauren, Quicksilver, and Liz
Claiborne.
Kohl’s Marketing and Distribution Strategies
Kohl’s main focus is marketing moderately priced merchandise to consumers. Kohl’s purchases its
merchandise from domestic and foreign suppliers. It sells family apparel, jewelry, shoes, accessories and
home items. The company distributes its products through its stores and its Internet channel. The
company’s annual earnings and cash flows depend largely on how business performs during the last quarter
– the holiday season – of each fiscal year. This is a major factor the company takes into consideration
when developing marketing strategies. The company employs 121,000 associates, crediting them for their
loyalty and dedication to the company.
Target Market
Kohl’s target market is middle-class Americans.
Risk Factors
Kohl’s is in a highly competitive market. Its competitors include other department stores, discounters,
home stores, specialty retailers, and wholesale clubs.
Plans for the Future
Kohl’s expects third and fourth quarter sales to range between negative 1 percent and positive one percent,
a margin more narrow than its competitors – between negative 5 and 3 percent. Kohl’s plans to open
approximately 37 new stores for a total of 56 stores within the fiscal year 2009. By the end of this month,
Kohl’s will have remodeled 51 stores, compared with 36 stores last year.
Kohl’s Corporation (NYSE:KSS) is in the discount and department store retail industry with corporations
based in Wisconsin (Kohl’s Corporation) and Delaware (Kohl’s Department Stores, Inc.). Competitors
include but are not limited to: JC Penney, Macy’s, The Gap, Target and Sears. On January 30, 2010, Larry
Montgomery, chairman on the board of directors and employee of 21 years, will retire. (lexisnexis.com,
SEC Filing from August 28, 2009)
(Kohl’s Web site, Investor Relations)
Kohl’s Annual Report: Form 8-K
The Dictionary of Finance and Investment Terms explains what an analyst does and why he or she is
worthy of our attention:
“FORM 8-K Securities and Exchange Commission required form that a publicly held company
must file, reporting on any material event that might affect its financial situation or the value of its shares,
ranging from merger activity to amendment of the corporate charter or bylaws. The SEC considers as
material all matters about which an average, prudent investor ought reasonably to be informed before
deciding whether to buy, sell or hold a registered security. Form 8-K must be filed within a month of the
occurrence of the material event. Timely disclosure rules may require a corporation to issue a press release
immediately concerning an event subsequently reported on
Form 8-K.”
Kohl’s filed an 8-K on September 3, 2009 to report its sales from a four-week period— the month of
August. Kohl’s issued a press release on September 3, 2009 through Business Wire.
A moderate investor with experience in mutual funds, stocks and bonds, “duanej” posted a blog response to
someone looking for buying ideas at Morningstar.com on April 11, 2009. Duanej said that Kohl’s looked
like a pretty inexpensive buy. Blogs are an open platform, giving anyone an opportunity to post their
opinions and receive direct feedback.
Cramer used a graph created by Dan Fitzpatrick from Realmoney.com to support his outlook for the retail
market. Cramer provided reasons that defend his and Fitzpatrick’s point of view. Cramer gave reasons for
consumer spending market to continue to rise.
Kohl’s Back-to-School Season
Cramer gave word to the masses that he foresees an increase in retail industry sales. Back-to-school season
is usually a most profitable time for the retail industry except that the shaky economy is causing consumer
spending to be extremely irregular. Kohl’s and other department stores cut fall spending by 30 percent.
(Cathy Horne, The New York Times, Sept 11, 2009) However, Kohl’s profits managed to stay up last month
for back-to-school, along with big chains such as Target and Wal-Mart. Kohl’s shares rose .2 percent.
Cindy Perman, writer at CNBC.com, covering the stock market, retail sector, and other business news said
that Kohl’s shares rose with the help of its cheaply priced, trendy merchandise. Rosalind Wells, chief
economist of the National Retail Federation, said that many retailers postponed their back-to-school
spending because they were waiting for the state sales tax holiday or hoping to receive additional discounts.
Cramer said that he has a positive outlook for retail chains.
Kohl’s Management Strategies
The corporation promoted someone from within, Kevin Mansell, to become the next CEO. Mansell had
been the company’s president since 1999. Boston University management professor, Fred Foulkes credited
Kohl's for promoting from within. Foulkes said that it reduces risk and sends the right message to
employees moving up the ranks. The current CEO, Larry Montgomery, will step down and fill the
company’s HR position. Many retail companies are pulling business execs in to fill HR positions, but
Kohl’s is recognized for fulfilling the position from within the company. (Workforce Management 87: Ed
Frauenheim, “From CEO to HR Minder”) Analysts recognize Kohl’s for its management team, investments
in technology and its marketing strategies. (May 15, 2009, Stephanie Rosenbloom: The New York Times)
Risk Factors
An article called “Analyst Picks and Pans” said,
“Kohl's earned $137 million, or 45 cents per share, in the period ended May 2, down from $153 million, or
49 cents per share, a year earlier. Analysts surveyed by Thomson Reuters expected profit of 43 cents per
share. Sales edged up 0.4% to $3.64 billion. Same-store sales slipped 4.2%.”
“For the full year, Kohl's raised its EPS forecast to a range of $2.19 to $2.42, up from $2 to $2.30. Analysts
are predicting net income of $2.52.”
“Kohl's also said it expects to earn 56 cents to 64 cents per share in the second quarter. Analysts expect
profit of 61 cents per share. The company expects same-store sales to fall 5% to 8% in the second quarter.”
“Kohl's guidance was ‘conservative’," according to analyst Liz Dunn with Thomas Weisel Partners. Dunn
wrote to clients that the company's inventory is still declining. It’s down about 0.5 percent in the quarter,
and that "continues to result in improved merchandise margins." (BusinessWeek: “Analyst Picks and Pans”
May 14, 2009)
Kohl’s Annual Report: What does the media say?
Strategic Talent Management
Kohl’s is one of the leading retailers in the country. Even during an economic recession, the company’s
annual sales are holding steady. The corporation is recognized for strategically utilizing their talent from
within in order to maintain a successful operation. Kohl’s believes that management strategy is key to the
company’s success. The corporation has promoted someone from within, Kevin Mansell, to become the
next CEO. Mansell has been the company’s president since 1999. Boston University management
professor, Fred Foulkes also credits Kohl's for promoting from within. Foulkes believes that it reduces risk
and sends the right message to employees moving up the ranks. The current CEO, Larry Montgomery, will
step down and fill the company’s HR position. Many retail companies are pulling business execs in to fill
HR positions, but Kohl’s is recognized for fulfilling the position from within the company. Montgomery
will manage human resources, legal and real estate departments. Kohl’s had nothing bad to say about their
current CEO– Montgomery. They are playing a game of chess, putting their most talented players in
positions where they have the most potential. For the 2008 fiscal year, the CEO salary was $2.8 million; the
HR director’s salary was $2.3 million. (Workforce Management 87: Ed Frauenheim, “From CEO to HR
Minder”)
Kohl’s Continues to Acquire New Designers
Kohl’s operates 1,022 department stores in 49 states, and customers can shop for merchandise online at
kohls.com. The sluggish economy has slowed down consumer spending especially in the apparel industry,
and now high-end fashion designers are looking to partner with mass-marketing retailers such as Kohl’s.
Kohl’s is one of many mass retailers. Other companies who are partnering with high-end designers include
Wal-mart, Old Navy, JCPenney, The Gap, and Target. However, Kohl’s retail selection has always
consisted of partnerships with exclusive brands that are recognized nationwide along with brands that are
private to Kohl’s. Kohl’s most recent hook-up was with designer Dana Buchman. (Crain’s New York
Business 24: Catherine Curan, “Increased designer-retailer hookups defy results”)
Kohl’s is forming a partnership with Lauren Conrad, who is a 23-year-old star of MTV’s reality TV series
“The Hills”. Beginning in October, the brand will be exclusive to Kohl’s, called LC Lauren Conrad. The
line will be California-inspired clothing for women. (April 22, 2009: Stephanie Rosenbloom, The New York
Times)
Kohl’s Marketing and Distribution Strategies
The company’s annual earnings and cash flows depend largely on how business performs during the last
quarter – the holiday season – of each fiscal year. This is a major factor the company takes into
consideration when developing marketing strategies. Kohl’s took on the 2008 holiday season with full
marketing force. While many companies’ spending decreased, Kohl’s pushed a plan that was marked by
more spending. The previous year’s holiday marketing plan clocked in at $158 million. Chief marketing
officer, Julie Gardner, explained that the messages would be sent in all forms such as direct mail, email,
radio and TV. The advertising was to be focused on weekends because families are tending to combine all
of their errands into one trip on weekends in order to save gas money. The company created advertisements
with Cirque de Soleil in order to provide consumers with “feel good messaging.” The advertisements will
support their devotion to value and that the Kohl’s customers can continue to count on exclusive brands.
(Advertising Age: Natalie Zmuda, “Kohl’s bulks up as rivals trim; Retailer to blast value message across
platforms to lure budget-conscious”)
Risk Factors
Kohl’s is in a highly competitive market. However, its competitors are trailing behind in success during this
economy with the exception of Wal-Mart. Both Kohl’s and Wal-Mart were recognized for their
performance in the current economy. Analysts recognize Kohl’s for its management team, investments in
technology and its marketing strategies. The new Dana Buchman line accounted for 44 percent of its sales.
While Kohl’s earnings results exceeded analysts’ expectations, investors still wince as its shares fall 1.69
percent, to $41.24. (May 15, 2009, Stephanie Rosenbloom: The New York Times)
Plans for the Future
Kohl’s seems to be more prepared and accommodating for consumers in a struggling economy. While most
retailers have to cut spending, Kohl’s chooses to continue buying and remodeling as the other chains close.
The Mervyn’s chain went bankrupt, and Kohl’s has remodeled many of them. Kohl’s is remodeling 40
percent more stores than last year. The company is expanding to new places across the country. The
company also raises sales by being a go-to destination for gifts during holiday seasons. (May 15, 2009,
Stephanie Rosenbloom: The New York Times)
Kohl’s Annual Report: What do analysts say?
Why Pay Attention to an Analyst?
Jim Cramer, host of the TV show “Mad Money” and co-founder, director, chairman and shareholder of
TheStreet.com, ranted last year, on his TV show, about the housing market. His predictions advised people
not to buy homes. One year later, homes values were dropping 20-50 percent. If only you had cable TV…
Anyone can make a prediction; however, analysts’ get more intimate. Their professional careers are
devoted to forming analyses and opinions and giving you the financial forecast.
The Dictionary of Finance and Investment Terms explains what an analyst does and why he or she is
worthy of our attention:
“ANALYST person in a brokerage house, bank trust department, or mutual fund group who
studies a number of companies and makes buy or sell recommendations on the securities of particular
companies and industry groups. Most analysts specialize in a particular industry, but some investigate any
company that interests them, regardless of its line of business. Some analysts have considerable influence,
and can therefore affect the price of a company’s stock when they issue a buy or sell recommendation.”
There are different types of analysts:
“CREDIT ANALYST person who (1) analyzes the record and financial affairs of an individual or a
corporation to ascertain creditworthiness or (2) determines the credit ratings of corporate and municipal
bonds by studying the financial condition and trends of the users.”
A moderate investor with experience in mutual funds, stocks and bonds, “duanej” posted a blog response to
someone looking for buying ideas at Morningstar.com on April 11, 2009. Duanej said that Kohl’s looked
like a pretty inexpensive buy. Blogs are an open platform, giving anyone an opportunity to post their
opinions and receive direct feedback.
Cramer used a graph created by Dan Fitzpatrick from Realmoney.com to support his outlook for the retail
market. Cramer provided reasons that defend his and Fitzpatrick’s point of view. Cramer gave reasons for
consumer spending market to continue to rise.
Kohl’s Back-to-School Season
Cramer gave word to the masses that he foresees an increase in retail industry sales. Back-to-school season
is usually a most profitable time for the retail industry except that the shaky economy is causing consumer
spending to be extremely irregular. Kohl’s and other department stores cut fall spending by 30 percent.
(Cathy Horne, The New York Times, Sept 11, 2009) However, Kohl’s profits managed to stay up last month
for back-to-school, along with big chains such as Target and Wal-Mart. Kohl’s shares rose .2 percent.
Cindy Perman, writer at CNBC.com, covering the stock market, retail sector, and other business news said
that Kohl’s shares rose with the help of its cheaply priced, trendy merchandise. Rosalind Wells, chief
economist of the National Retail Federation, said that many retailers postponed their back-to-school
spending because they were waiting for the state sales tax holiday or hoping to receive additional discounts.
Cramer said that he has a positive outlook for retail chains.
Kohl’s Management Strategies
The corporation promoted someone from within, Kevin Mansell, to become the next CEO. Mansell had
been the company’s president since 1999. Boston University management professor, Fred Foulkes credited
Kohl's for promoting from within. Foulkes said that it reduces risk and sends the right message to
employees moving up the ranks. The current CEO, Larry Montgomery, will step down and fill the
company’s HR position. Many retail companies are pulling business execs in to fill HR positions, but
Kohl’s is recognized for fulfilling the position from within the company. (Workforce Management 87: Ed
Frauenheim, “From CEO to HR Minder”) Analysts recognize Kohl’s for its management team, investments
in technology and its marketing strategies. (May 15, 2009, Stephanie Rosenbloom: The New York Times)
Risk Factors
An article called “Analyst Picks and Pans” said,
“Kohl's earned $137 million, or 45 cents per share, in the period ended May 2, down from $153 million, or
49 cents per share, a year earlier. Analysts surveyed by Thomson Reuters expected profit of 43 cents per
share. Sales edged up 0.4% to $3.64 billion. Same-store sales slipped 4.2%.”
“For the full year, Kohl's raised its EPS forecast to a range of $2.19 to $2.42, up from $2 to $2.30. Analysts
are predicting net income of $2.52.”
“Kohl's also said it expects to earn 56 cents to 64 cents per share in the second quarter. Analysts expect
profit of 61 cents per share. The company expects same-store sales to fall 5% to 8% in the second quarter.”
“Kohl's guidance was ‘conservative’," according to analyst Liz Dunn with Thomas Weisel Partners. Dunn
wrote to clients that the company's inventory is still declining. It’s down about 0.5 percent in the quarter,
and that "continues to result in improved merchandise margins." (BusinessWeek: “Analyst Picks and Pans”
May 14, 2009)
Kohl’s Annual Report: Social Media
Social Media: Facebook
Social media networks such as Facebook have become a way for companies to increase brand awareness.
Kohl’s Web site has a link to its Facebook profile on the company’s home page. By clicking the blue link at
the company’s site, a customer is taken directly to the Kohl’s Facebook profile where he or she can become
a fan, joining more than 700,000 other people who are currently fans of Kohl’s. Fans are able to participate
in conversation with other fans, feed their opinions on the main page of the profile, also known as “The
Wall.” The company does not censor negative feedback, and right now the latest “buzz” or most frequent
topics of conversation on the profile are complaints. The past 12 hours of commentary on Kohl’s Wall has
been about the company’s decision to discontinue free shipping for MVC (Most Valuable Customer)
cardholders for orders placed online. Customers claim that the free shipping set the company apart from its
competitors such as Sears, JcPenney and Macy’s. Most of the posts announce that they will no longer be
shopping at Kohl’s, pleading for the revival of free shipping for online orders. In one posting, the
customer’s characterization of herself was the same as Kohl’s description of its target market at the Web
site:
Sharon Carlisle Kohl's have you no women in your organization? We would tell
you
along with any MBA that when you have a good thing going, "you do not
change it". Free shipping
for the devoted, everyday shopper, like me, was your calling card. Now YOU are just an ordinary store
with no savvy. You had better
check with your web experts, if you have any, what this will do to your
online shopping profits when there is no free shipping!!!
Ask any woman, we ARE the
shoppers
and we know the best place to shop. There is no substitute when
shopping at Kohl's with free
shipping!!! Bring it back, we can't wait any longer!!! Don't let Santa Kohl's be stuck in the chimney.
The commentary is further interesting because Kohl’s has been confident for holiday sales revenue in the
past, and so it will be interesting to see how the lack of free shipping will affect the company’s sales.
Other information on Kohl’s Facebook page includes:
-The “Info” tab that has the Web address and its mission statement.
- The “Style&Savings” tab with links to specific brands at Kohl’s and also ways
to save money at Kohl’s.
-The “Video” tab with clips from events.
-The “Green Scene” tab that goes into depth about the company’s sustainability
initiatives.
-The “Discussions” tab allows people to write a blog and receive comments or
feedback. It also gives figures at the company an idea of the current buzz about
the company’s social standing.
Other Social Media Platforms
Kohl’s has videos streaming on Youtube.com; however, individuals posted the videos, not Kohl’s. The
company does not have a profile on Youtube. In 2008, Kohl’s was not utilizing a Twitter account; now, it
is. Customers must become a member of Kohl’s on Twitter in order to see its daily statuses, which may be
something like deals of the day. One blogger credited Kohl’s for it’s large following on Facebook but was
disappointed with the lack of transparency. Apparently, the blogger and others discovered that the
“customers” that were constantly making posts about he or she’s best buys at Kohl’s or favorite trends were
not really customers. The marketing executive at Kohl’s, Ed Gawronski, and other company stakeholders
were identified after continuously posting comments as if he or she were the customer. There are lots of
blogs that people can find about Kohl’s, but in order to be heard exclusively by fans of Kohl’s, one must
post a discussion on Facebook.
Investor Relations
The investor relations at Kohl’s have yet to embrace social media. However, blogs on sites such as
retailsails.com openly analyze sales data, creating graphs and overviews.
Sources:
http://www.experiencetheblog.com/2009/06/transparency-or-lack-thereof-on-kohls.html
http://www.facebook.com/kohls?v=wall&ref=share
http://twitter.com/kohlsdotcom
http://www.youtube.com/results?search_query=kohls&search_type=