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Amid Sale Speculation, Kohl’s Furthers Investment in Stores to Drive Growth

Kohl’s is renewing and bolstering its store strategy as the Wisconsin-based retailer said on Wednesday that it aims to “match the changing industry landscape and customer needs.”

Among the ways it plans to do this is increasing its investment in store strategies over the next three years that will “improve the store experience for customers and associates,” as well as open 100 new, smaller format stores in markets previously untapped by its physical presence over the next four years.

According to Kohl’s, stores are the “foundation” of its omnichannel platform and is seeking to modernize its fleet. These modernizations include services it has already implemented like in-store pick-up, drive-up, self-pick-up, and Amazon returns.

Among the new services, the company is rolling out self-serve buy online, pick up in store and by the end of the year, it will be available in all stores. Kohl’s is also continuing to test self-serve returns, currently in over 100 stores, with more planned throughout the next 18 months. Additionally, self-checkout is being tested and will deliver a new kind of checkout experience for customers.

Further, Kohl’s said it has introduced “dedicated zones for discovery” which will offer curations of cross-category product and brands including diverse- and female-owned companies. The retailer said this initiative allows the company to “leverage its leading omnichannel platform and invest in these emerging brands to curate destinations for discovery in its stores.” Since the inception of Kohl’s emerging brand program in 2019, the company has introduced over 70 new brands to its customers.

The modernization also includes its partnership with Sephora. Kohl’s is on track to have 850 Sephora at Kohl’s shops by 2023, with 600 locations by August. Sephora at Kohl’s will also add six new prestige beauty brands to its assortment this spring. Murad, Clarins, Jack Black, Living Proof, Versace, and Voluspa will be joining the range of available brands that currently include the likes of Rare Beauty, Nars, Charlotte Tilbury, Kiehl’s, Giorgio Armani, Olaplex, Clinique, and Sephora Collection.

As for its planned smaller format stores, the expansion follows a pilot of over 20 smaller stores, Kohl’s said. The average Kohl’s store of around 80,000 square feet is too large for many small markets. By introducing these smaller format stores, most at approximately 35,000 square feet, Kohl’s said it gains the flexibility to “enter new neighborhoods while also providing a hyper-localized experience to cater to the community’s needs.”

This June, Kohl’s will open a brand-new store in Bonney Lake, Wash. and in the fall, four additional new small format stores will open in San Angelo, Texas, Morgantown, W.Va., Tacoma, Wash., and Lenox, Mass. These new stores will also be among the first to test Sephora at Kohl’s in smaller store formats.

Kohl’s added that it is using information technology to create a “highly-localized experience” in these smaller stores such as catering the new Tacoma store’s merchandise toward the active lifestyle customer in that market by offering a more focused assortment of outdoor gear. In total, these new stores represent a more than $500 million in sales opportunity as they ramp to full productivity.

“Kohl’s began with roots as a brick-and-mortar company, and these 60 years of experience have set the company up to become a leading omnichannel retailer,” Mark Griepentrog, Kohl’s chief property officer, said in a statement. “Our strong and productive off-mall store base can continuously evolve with our customer’s expectations and demand, and we see substantial opportunities to leverage our real estate in producing long-term growth.”

This renewed investment in stores come at a time when Kohl’s is weighing offers from multiple parties that are interested in purchasing the company. The department store chain said in a March press release that it has hired Goldman Sachs to engage with potential bidders and discuss alternatives for the business. Kohl’s said in a separate letter to shareholders that it has engaged with over 20 parties. These proposals, Kohl’s said, are non-binding and without financial commitment.

Among the speculated bidders included the owners of JCPenney. According to an April report in the New York Post, the proposed deal comes from Simon Property and Brookfield Asset Management, the two entities that bought JCPenney out of bankruptcy in 2020 for $1.75 billion. The deal values Kohl’s at more than $8.6 billion, or $68 per share.

Hudson’s Bay Co., which owns Hudson’s Bay and Saks, is also reportedly interested in making a play for Kohl’s.

On the company’s first quarter earnings call last week, Kohl’s CEO Michelle Gass commented on the proposed sale of the business, stating that the company is “continuing to engage with multiple interested parties as they work to prepare fully-financed binding proposals.”

Gass added that Kohl’s is continuing its “detailed due diligence phase” and is “pleased with the number of parties who recognize the value of our business and plan.”

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