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Kohl’s Makes its Case to Investors with Plans for Additional Sephora and Small-Format Stores

Kohl's investor update growth strategy

At its virtual Investor Day March 7, Kohl’s outlined its strategy to drive growth and “become the retailer of choice for the active and casual lifestyle,” with plans to add more small-format stores, continued expansion of its Sephora at Kohl’s partnership and enhanced data science applications to drive personalization and relevancy for both online and offline customers.

The updates come as Kohl’s continues to face pressure from investors, including a recent acquisition offer that the Kohl’s Board rejected, as well as calls for the company to spin off its ecommerce business and replace senior leadership. It’s no surprise then that a key focus of the investor meeting was how Kohl’s plans to deliver shareholder value, with the retailer outlining new long-term financial targets of low-single digits percentage sales growth and a 7% to 8% operating margin, as well as the previously announced 100% increase in shareholder dividends and a $3 billion share repurchase program.

“Kohl’s is undergoing a significant transformation of our business model and brand,” said CEO Michelle Gass in a statement. “We have fundamentally restructured our business to drive sustainable and profitable growth, while providing a strong return to shareholders. We have laid the foundation for our winning strategy and have started to implement key initiatives that will scale and accelerate our growth in the years ahead. We delivered record EPS [earnings per share] in 2021 and achieved our operating margin goal two years ahead of schedule, reflecting our progress to drive more profitable growth.”

Key to Kohl’s transformation strategy will be an enhancement of the retailer’s omnichannel reach, both through expansion of its store portfolio and continued efforts to build its digital business. The company announced plans to open more than 100 new, small-format Kohl’s stores over the next four years, while at the same time growing its digital business to $8 billion by enhancing “discovery and shopability.” Kohl’s plans to enhance its data science capabilities in an effort to engage with customers more efficiently and provide greater relevance. These omnichannel efforts will be backed up by the rollout of self-serve buy online, pick up in-store (BOPIS) to all stores this year, as well as continued testing of self-serve returns and check-out.

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The company also focused on its assortment as it “evolves into a focused lifestyle concept,” with a particular focus on the active and casual categories. Company leadership said Kohl’s will work to modernize its brand and offerings through significant growth in the company’s dress business, an expansion in the outdoor and swim categories and increased inclusivity offerings, as well as store refreshes. The retailer also detailed plans for the launch of “innovation zones” that will feature cross-category assortments and focus on diverse-owned brands.

Kohl’s is also doubling down on its partnerships with Sephora and Amazon Returns to drive foot traffic to stores. The company previously announced plans to grow its Sephora at Kohl’s business to $2 billion through an expanded store rollout to 850 stores. The news came at the same time that competitor Target announced plans to expand its own shop-in-shop partnership with Ulta Beauty.

Other key areas of development mentioned at the investor meeting included:

  • Continued expansion of the Kohl’s Media Network;
  • Increasing Kohl’s Card Rewards to 7.5%;
  • The introduction of a co-branded credit card in 2023;
  • A commitment to reach net zero emissions by 2025; and
  • Progress toward the company’s goal of tripling its spend with diverse suppliers.

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