Kohl's CEO prioritizes in-store strategy: Digital operations cited as main hindrance
Kohl's, the American department store chain, is revamping its brick-and-mortar stores and changing its product mix in a bid to boost sales and improve operating margins. The retailer is focusing on strategic partnerships, store-in-store concepts, and enhancing its omnichannel capabilities.
The latest partnership is with Babies “R” Us, aimed at tapping into the $50 billion U.S. baby market and attracting family-centric shoppers. This follows the successful Sephora collaboration, which integrated high-demand, specialty brands within Kohl’s locations, enriching the product mix beyond traditional apparel and home goods.
As part of this strategy, Kohl’s is closing underperforming stores (27 closures announced for 2025) to optimize its real estate portfolio and focus on higher-potential locations. The company is also planning a $3.7 billion redevelopment plan to further revitalize physical stores, investing in store experience and layout.
Kohl’s aims to convert foot traffic into incremental sales, projecting that these changes could add up to $2 billion. The success of the Sephora partnership serves as a blueprint by integrating high-demand, specialty brands within Kohl’s locations, enriching the product mix and driving store traffic.
In addition to the Babies “R” Us sections, Kohl’s is implementing broader merchandising changes and seeking new strategic alliances to boost store visits. The company is focusing more on name brands and changing the mix slightly away from private label.
The retailer's efforts to revitalize its stores are evident in the numbers. Kohl's gross margin expanded by 158 basis points to 38.9% in Q3, while total beauty sales in Sephora shop-in-shops rose more than 70% in Q3. However, Kohl's comp sales declined by 5.5% in Q3, and its net income declined by 39% to $59 million in Q3.
Despite these challenges, Kohl’s is making significant changes to its strategy, including a shift in focus back to brick-and-mortar stores. The company is facing criticism from industry experts for not providing customers with a modern and engaging store experience. GlobalData Managing Director Neil Saunders criticized Kohl’s for not keeping pace with its competitors in terms of store experience and customer retention.
Walmart is stepping up its efforts in store improvements, while others in the market, like Target, have already made improvements to their stores. Kohl's COO David Alves left the company after about six months and will not be replaced. The company's "other revenue" (mostly credit card business) decreased by 6.2% to $211 million.
This approach is a strategic attempt to offset softening e-commerce growth by making Kohl’s physical stores destinations for exclusive brands and convenient shopping experiences that online cannot fully replicate. The retailer is hoping that these changes will help it compete more effectively in the highly competitive retail market.
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- Kohl's is seeking partnerships with brands like Babies “R” Us and Sephora, aiming to tap into lucrative markets and enrich their product offerings beyond traditional retail items, such as apparel and home goods.
- In an effort to stay competitive in the retail industry, Kohl's is investing in revitalizing its brick-and-mortar stores, closing underperforming ones, and implementing a $3.7 billion redevelopment plan to enhance store experiences and layouts.
- As part of its strategy, Kohl's is focusing on offering name brands, changing the mix away from private label, and developing new strategic alliances to attract more customers and drive store visits.
