How Kohl's is trying to keep its stores fresh ahead of the holidays

Key Points
  • Kohl's is trying new spaces in stores, where it rotates brands and pulls together entire outfits to encourage people to buy more.
  • It's also investing more in its own brands ahead of this holiday season.
Kohl's says it will swap out the six brands featured in the "Curated by Kohl's" spaces on a quarterly basis.
Source: Lauren Thomas, CNBC

JERSEY CITY, N.J. — Kohl's stores are getting a bit of a refresh and are being infused with new brands ahead of this holiday season.

At a Kohl's store here, the retailer has rolled out a space called "Curated by Kohl's," to be heading to 50 of Kohl's roughly 1,100 locations nationwide. It features six brands, including lingerie maker Adore Me and card marker Lovepop. And in these spaces, Kohl's is working with Facebook — and its massive database of brands that advertise on the social media platform and Instagram — to help market the brands and choose what might rotate in next.

Also in the Jersey City store is a new "Outfit Bar" setup, spanning about 600 square feet, where Kohl's is testing pulling together outfits on mannequins to try to encourage younger female customers to buy entire looks, shoes and accessories. Again, it's currently testing this in 50 locations across the chain.

Kohl's also just this month launched additional private labels, including one designed by HGTV's 'Property Brothers' stars Drew and Jonathan Scott, to fill spaces in stores where the company believes it can sell more — and at better margins by creating those brands in house.

"We feel strongly that we want to become more known for discovery ... it's more opportune to launch new brands," said Kohl's Chief Merchandising Officer Doug Howe during an interview here. "It's important for our new customers, but we are doing it for our existing customers as well ... to be able to have this pipeline of newness."

"Newness" is exactly how Kohl's describes what it's investing in today. CEO Michelle Gass used the word 11 times on the retailer's earnings conference call in August.

And the hope would be these "newness" initiatives can give Kohl's a needed boost to sales. The company hasn't been immune to the trend of more shoppers turning directly to their favorite brands to buy things, bypassing retailers. Kohl's knows it has to give people a reason to shop there.

In its latest reported quarter, sales at Kohl's stores open for at least 12 months were down 2.9%, worse than analysts were expecting. Quarterly sales of $4.17 billion also missed Street expectations.

Kohl's shares have fallen about 23% this year, bringing the company's market cap to about $8.1 billion.

"Stores remain critical to our success and we continue to invest to elevate the overall experience," Gass said during a call with analysts. "A big part of how customers are experiencing a modernized Kohl's is through the introduction of new brands and merchandising concept, and we'll continue to drive that forward."

The company admitted its home business under-performed during the latest quarter, dragging down overall results. But Gass said Kohl's expects that the "newness" coming to stores will help turn things around.

Kohl's says the launch of Scott Living marks its largest brand rollout in home ever.
Source: Lauren Thomas, CNBC

Some of what Gass was referring to has showed up in New Jersey.

A new brand called Scott Living, selling home goods like throw pillows, candles, bedding and other decor, launched last week. Kohl's has another exclusive deal with shoemaker Ugg for its home brand called Koolaburra, which sells sherpa blankets and pillows. Kohl's also just started selling a new pet brand, in a partnership with celebrity comedian Ellen DeGeneres, called ED Ellen DeGeneres Pets collection, for pet costumes and play toys.

"We feel really strongly that if these [brand partnerships] aren't authentic, we wouldn't be interested in doing them," Howe said. He added that the goal is to get more people "coming to check Kohl's out because they didn't know it had this brand or that brand."

To be sure, some of Kohl's initiatives aren't exactly rocket science in retail.

Macy's has similarly been opening marketplaces in its stores that rotate brands. Last holiday season, the chain also teamed up with Facebook to curate a selection of brands.

And Nordstrom has been holding "pop-ins," which features merchandise from digital-first brands like luggage company Away and apparel retailer Everlane for a limited time.

Target has also been organizing its apparel sections to show complete outfits on mannequins, with all the items on display positioned near the merchandise to make it easier for shoppers to purchase the entire ensemble.

Kohl's is catching up to some of this.

Kohl's hopes that exclusive brand partners, like Nine West, will help it draw shoppers to stores and online. It sells Nine West apparel, shoes and handbags in all of its stores.
Source: Lauren Thomas, CNBC

Still, analysts are happy to see Kohl's refreshing its merchandise and stores, especially in what looks like a push to reach more millennials.

"We are encouraged by Kohl's prudent strategies to win over a younger generation of shoppers by focusing on providing newness through products, partnerships and experiences," Cowen & Co. analyst Oliver Chen said in a note to clients. He said Cowen's consumer surveys tend to find that the average Kohl's shopper is older than those at Macy's and J.C. Penney, and so the firm is pleased to see Kohl's trying to "get younger."

"We believe it is most critical for Kohl's to focus on merchandise, speed to market, and newness given new shoppers consume trends faster than ever," Chen said.

Kohl's is testing spaces called the "Outfit Bar" in 50 stores, where it pieces outfits together and sells those items right next to the mannequins. It says the initiative is helping grow basket sizes.
Source: Lauren Thomas, CNBC

Looking for other areas of growth, Kohl's has also been expanding its assortment of active-wear in stores and testing something new in beauty.

It's expanding the square footage of space it devotes to athletic apparel — brands like Under Armour and Nike — in 160 stores. And this fall, it's adding 100 more Adidas pop-up shops, which it says have been wildly successful, bringing that total to 175 locations.

Gass has called beauty a "significant long-term growth opportunity for Kohl's," because roughly 70% of the chain's customers are female.

Ahead of the holidays, the company is taking a dozen locations and expanding the square footage it devotes to cosmetics. In 200 other stores, it's adding a "beauty impulse" area where it will showcase 20 top beauty brands.

"This is one of Kohl's towering strengths — testing and iterating," Howe said.

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