• Cecile Corral

Soft Home Leading at Kohl's

Unlike many of its competitors in the department store sector, Kohl's posted better-than-store-average comps in its home area, and experienced "heavy growth" in its soft home categories during the first quarter.

During the 834-unit mid-priced department store chain's quarterly earnings conference call, president Kevin Mansell said home's growth was being "fueled" by several efforts.

These include: strong customer acceptance to new brands, such as Vera Wang, Chaps, and Casa Cristina — for which he noted that Kohl's was "very happy with its performance" — positive customer response to the push for better and best price points; rationalizing the assortment; and improvements in inventory management with solid in-stock percentages and "way up" service levels.

"Home comps were better than the store total, and this was driven by the same things we've been successful with in home over last year-and-a-half or so," Mansell said. "I do think we're running contrary to trend. We definitely are not seeing home as being soft. The new brands and new launches are helping home in a big way."

The company reported a 24.9% increase in first quarter net income to $209.0 million, up from $167.2 million a year ago. Net sales increased 11.8% to $3.6 billion from $3.2 billion last year. Comparable store sales rose 3.9%.

Come September with the launch of some new programs like Food Network in housewares, home is one of the categories that will be further supported "with enhanced pictures and focal points in all stores," said senior evp Tom Kingsbury.

Added Larry Montgomery, chairman and ceo: "We have a lot of new initiatives coming this fall. Our partnership with Vera Wang and the Food Network will drive a lot of excitement into our stores. These initiatives will allow us to not only gain share of wallet of existing customers — but gain new customers as we continue to broaden our customer base."

Also during the year's second half, Kohl's will open 110 to 115 new units — most of them during the third quarter.

Related to its "innovation store" concept, the retailer has received positive customer feedback, "and most importantly the innovation stores continue to outperform the non-innovation stores." The 29th store remodel was recently completed, and for 2008 there are 55 more stores slated for remodeling.

Kingsbury said, "In the upcoming months we will solicit customer feedback and review results to further refine our remodel strategy."

When asked by a financial analyst about the status of Kohl's partnership with Li & Fung, Mansell said the retailer is "very happy with that relationship" and it is "not changing." He characterized it as "growing, and you're seeing it in the results. We have some of the biggest improvements in margins in the industry, and a lot of that is due to sourcing efforts of private and exclusive brands."

Kohls Corporation

Qtr. 5/5 ($millions) 2007 2006 % change
Sales $3,572.0 $3,196.3 11.8%
Oper. Income (EBIT) 346.1 282.2 22.6
Net income 209.0 167.2 24.9
Per share (diluted) 0.64 0.48 33.3
Average gross margin 36.9% 36.1%
SG&A expenses 24.0% 24.1%

Cecile CorralCecile Corral | Senior Product Editor, Home Textiles Today

Cecile B. Corral has been a product editor with Home Textiles Today since late 2000. She covers the area and accent rug, kitchen textiles, table linens, beach towels, decorative bath and decorative pillow categories, as well as some retail subjects.

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