Smarter coupons. More Kohl’s Cash. And smaller stores with more of what you want and less of what you don’t.
Will all of that be enough to fix what ails Kohl’s?
The struggling department store chain has unveiled some changes, from its promotional strategies, to its store designs, to the way it defines itself going forward.
“We’re evolving our position from a department store to a more focused lifestyle concept centered around the active and casual lifestyle,” CEO Michelle Gass said in a presentation to investors this week. “This is unique and we can own this space.”
Kohl’s has spent the past year trying to address challenges including declining sales, confusing promotions, a frumpy image among younger shoppers, and activist investors impatient for results. Now company executives say they see a path forward.
The first is by “modernizing its brand and offerings” to become “the retailer of choice for the active and casual lifestyle.” As part of that effort, the retailer plans to open more than a hundred new smaller-format Kohl’s stores with a more curated product selection “to fit the unique needs for how people are living today and for the future.”
Other changes include testing things like self-serve returns and self checkout, an improved website experience, and the expansion of the popular new Sephora departments to hundreds more stores.
For deal-seekers, though, the biggest changes may involve Kohl’s ever-present promotions. In some ways, they’re going to get better – in other ways, perhaps somewhat less so.
“We already have our industry-leading Kohl’s Card, and we’re ready to take it to the next level,” Chief Marketing Officer Greg Revelle said. Following a pilot program in select markets, all Kohl’s store credit card users beginning this spring will get 7.5% cash back in the form of Kohl’s Cash redeemable on future purchases, up from the previous 5%. “Essentially, customers will earn 50% more in rewards when they use their card,” Revelle said. “This is a huge new benefit for the nearly 19 million Kohl’s Card members who are also rewards members.” Kohl’s also plans to introduce a co-branded credit card next year, which will allow customers to earn Kohl’s rewards anywhere they use the card.
Non-cardholders, meanwhile, may benefit from smarter promotions more tailored to what they are likely to buy. “We use a lot of couponing,” Chief Financial Officer Jill Timm acknowledged, and that’s not going to change. But Kohl’s will start “using the couponing in a more targeted manner, versus making it just general scale for everyone.” More personalized offers will mean that “you and I may not get the same coupons,” Timm explained, “and I think that’s where we’re going to be better than we have been in the past.”
But simplified promotions won’t always work in the customer’s favor. “I would also say we’ll see us have less stackable offers,” Timm said. “We know our new customers find confusion when they have to do a lot of math on multiple offers.” And in this inflationary environment, Kohl’s frequent discounting will allow it to raise prices without actually raising prices. “Instead of having to take adjustments on what people see for ticket, we can say instead of 40% off, it can be 30% off,” Timm said. That “gives us a lot of flexibility to take price through less promotions in terms of what we’re on sale at.”
Time will tell whether these changes please shoppers. But the verdict from some anxious investors is already in.
“For us, nothing’s really changed,” Macellum Capital Management CEO Jonathan Duskin told Yahoo Finance Live. “Things are deteriorating. And I think that’s been a problem that Kohl’s has for many years.”
Macellum, one of Kohl’s largest stockholders, has been advocating for changes at the retailer, to everything from its promotions to the makeup of its executive leadership.
“Kohl’s uses a dizzying array of promotional gimmicks that makes it difficult for many customers to know the actual price of an item,” Macellum wrote in a letter to fellow stockholders last year. The letter urged Kohl’s to “streamline the myriad of different promotions.” In addition, “Kohl’s has been talking about fixing its loyalty program for years and has made little progress… While there have been some recently announced changes to simplify the program, more needs to be done.”
Following this week’s presentation, Duskin remains unimpressed. “We think this board needs to be completely revamped,” he said. “There needs to be a new majority in the room that’s putting a credible plan together with real retail experts.”
So if you’re a Kohl’s credit card holder, or a fan of Sephora or active and casualwear, Kohl’s planned changes may be just what you’re looking for. But if activist investors have their way, be prepared – because these changes may only be the beginning.
Image source: Kohl’s
