Fit to wander shay mitchell

A Progressive Digital Media business

COMPANY PROFILE

Kohl's Corporation

REFERENCE CODE: A8F67F35-6EB7-483C-9771-E3C4AA08E107 PUBLICATION DATE: 14 Jan 2016 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED.

TABLE OF CONTENTS

Company Overview..............................................................................................3

Key Facts...............................................................................................................3

SWOT Analysis.....................................................................................................4

Kohl's Corporation Page 2 © MarketLine

Kohl's Corporation TABLE OF CONTENTS

COMPANY OVERVIEW

Kohl's Corporation (Kohl's or 'the company') operates specialty department stores in the US. The department stores offer national and private label brands in various product categories, including apparel, footwear, accessories, beauty and home products. The company is headquartered in Menomonee Falls, Wisconsin and employed about 137,000 people as of January 31, 2015, of whom 105,000 were part-time employees.

The company recorded revenues of $19,023 million in the financial year ended January 2015 (FY2015), registering a marginal decrease compared to FY2014.The operating profit of the company was $1,689 million in FY2015, a decrease of 3% compared to FY2014. The net profit was $867 million in FY2015, a decrease of 2.5% compared to FY2014.

KEY FACTS

Kohl's CorporationHead Office N56 W17000 Ridgewood Drive Menomonee Falls Wisconsin 53051 USA

1 262 703 7000Phone

Fax

http://www.kohlscorporation.comWeb Address

19,023.0Revenue / turnover (USD Mn)

JanuaryFinancial Year End

137,000Employees

KSSNew York Ticker

Kohl's Corporation Page 3 © MarketLine

Kohl's Corporation Company Overview

SWOT ANALYSIS

Kohl's operates specialty department stores in the US. It is the exclusive US retailer for a number of brands, including Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. The strategy of focusing on expanding its exclusive brands offering drives the increase in customer base and consequently the top line growth as each of its exclusive brands enjoy strong customer loyalty. A strong portfolio of exclusive brands provides a competitive advantage to the company thereby strengthening its market position. However, intense competition could have an adverse impact on the company's sales and profitability.

WeaknessesStrengths

Concentrated geographic presence and limited product selection

Differentiating itself through exclusive brand offerings Strong omni-channel presence

ThreatsOpportunities

Intense competitionIncreasing preference to shop online Increasing labor costs in the USGrowing apparel market in the US

Growing demand for private label brands

Strengths

Differentiating itself through exclusive brand offerings

Kohl's is the exclusive US retailer for a number of brands such as Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. Other than licensing agreements, the company also partners with popular designers and celebrities in order to feature their designed garments at its stores. For instance, in 2013, the company partnered with various designers including Catherine Malandrino, Derek Lam and Peter Som for its DesigNation limited-edition collection. Kohl's launched the Derek Lam for DesigNation limited-edition collection featuring misses' apparel and swimwear at Kohl's stores and Kohls.com in 2013. Catherine Malandrino for DesigNation collection featuring dresses, skirts, pants, shirts, sweaters and outerwear was made available at Kohl's stores nationwide and at Kohls.com in 2013. In FY2014, the company launched an assortment of over 20 new national beauty and fragrance brands in over 250 stores and on-line. In April 2014, Kohl's and Disney announced a Disney-branded apparel collection for kids under the Jumping Beans brand, exclusively at Kohl's stores and at Kohls.com. In September 2014, Kohl's announced a partnership with MILLY by Michelle Smith to launch its DesigNation limited-edition collection. The capsule collection features women apparel. In the same month, the company announced the availability of Elie Tahari for DesigNation collection at Kohl's stores nationwide and on Kohls.com.

Kohl's Corporation Page 4 © MarketLine

Kohl's Corporation SWOT Analysis

Kohl’s announced the availability of Gaiam women’s apparel collection at Kohl’s stores nationwide and on Kohls.com, in April 2015. In August 2015, the company, in partnership with actress and fitness enthusiast, Shay Mitchell, introduced ‘Fit to Wander’ athleisure apparel collection at Kohl’s stores and on Kohls.com. Kohl’s announced the availability of Thakoon for DesigNation collection at Kohl's stores nationwide and on Kohls.com, in September 2015. In October 2015, the company announced the availability of Madden Girl collection at Kohl’s stores and on Kohls.com.The collection includes cold weather boots, accessories and outerwear.

The strategy of focusing on expanding its exclusive brands offering drives the increase in customer base and consequently the top line growth as each of its exclusive brands enjoy strong customer loyalty. In addition, the private and exclusive brands, which have higher gross margin rate than national brands, will increase the profitability for Kohl's. A strong portfolio of exclusive brands therefore provides a competitive advantage to the company and helps in strengthening its market position.

Strong omni-channel presence

Kohl’s follows an omni-channel strategy, which involves integration of stores, internet and mobile devices in order to meet the needs of customers as well as to deploy all of the company's inventory. Through this strategy, the company’s stores can increase online sales by providing customers opportunities to view, touch and/or try on physical merchandise before they order online; customers can return online purchases at the company’s stores, as well as earn and redeem Kohl's Cash coupons and Yes2You rewards online or in store irrespective of where they were earned; and in-store customers can order from online kiosks in its stores. This strategy also helps the customers who utilize the company’s mobile application while in the store to receive mobile coupons that can be used when they check out. They can also order online and pick-up in store in approximately 100 stores. Further in September 2015, Kohl’s introduced a new omnichannel and digital initiative to deliver an easy shopping experience to its customers. These initiatives include a store mode for Kohl’s mobile application, enhanced mobile payment options like Apple Pay, a continuous omnichannel shopping bag across platforms, and visa checkout on Kohls.com and on mobile. Kohl’s will also pilot same-day delivery in selected markets.

Therefore, increasing focus on omni-channel approach will help in presenting and selling its brands and collections to its customers in an efficient manner, in both the online and offline channels. This approach further helps in increasing Kohl’s market penetration across various segments of customers.

Weaknesses

Concentrated geographic presence and limited product selection

Kohl's is completely dependent on the US economy for its revenue generation. In comparison, its competitors such as The Gap and Wal-Mart Stores have operations in countries outside the US as well. The Gap derived 23% of its revenues from non-US regions (7% from Canada and 16% from other foreign countries) in FY2015.Wal-Mart Stores, which operates in the US and other international

Kohl's Corporation Page 5 © MarketLine

Kohl's Corporation SWOT Analysis

markets, derived 28.2% of its revenue from international markets during the same period. Diversified business operations allow these companies to reduce their business risk by limiting exposure to fluctuations in economic factors in a particular region.

In addition, the company offers a limited product selection as compared to its peers. Sears Holdings’ product assortment includes apparel, toys, home fashion products, outdoor living products, consumer electronics, home appliances, footwear, grocery, sporting goods, health and beauty products, tires and batteries, and jewelry and accessories among others. Kohl's, in comparison, offers an assortment of apparel, footwear, accessories, soft home products such as sheets and pillows, and housewares.

Thus, concentrated geographic presence makes Kohl's vulnerable to fluctuations in the US economy which, in turn, could adversely impact its top-line growth. In addition, the company's limited product selection restricts its potential to compete against companies with diversified product offerings.

Opportunities

Increasing preference to shop online

Online shopping in the US has witnessed strong growth over the last few years. According to the US Department of Commerce, online retail sales (adjusted for seasonal variation) in the US increased from $169.3 billion in 2010 to $297.2 billion in 2014, representing a compound annual growth rate (CAGR) of 15.1%. e-commerce sales increased 14.4% in 2014 over the previous year. Total retail sales, on the other hand, grew by only 3.6% during 2014. e-commerce sales accounted for 6.4% of total retail sales in 2014, compared to 4.4% in 2010. Furthermore, e-commerce sales for the third quarter of 2015 totaled $87.5 billion, an increase of 15.1% compared to the third quarter of 2014.

Kohl's has a strong presence in the online retail format. The company markets a range of product categories through its e-commerce site www.kohls.com.The website offers a selection of items and categories beyond what is available in stores. The website primarily focuses on offering extended sizes, product line extensions and web-exclusive product lines. The company also operates four e-commerce fulfillment centers to distribute purchases made through its e-commerce site. By leveraging its existing platform, the company can capitalize on the growing trend to shop online and also expand customer base.

Growing apparel market in the US

The apparel industry has witnessed a decline in the last few years as the demand declined due to several factors, including the economic slowdown and the fluctuations in the raw material prices which led to an increase in the prices. However, with the economic condition in developed markets improving leading to an increase in consumer spending, the apparel market is expected to perform well in the next few years. According to MarketLine, the US accounts for 28.5% of the global apparel retail industry value. The apparel retail industry in the US grew by 1.9% in 2014 to reach a value of $375.1 billion. Womenswear was the largest segment of the apparel retail industry in the US for the

Kohl's Corporation Page 6 © MarketLine

Kohl's Corporation SWOT Analysis

same period, accounting for 51% of the industry's total value. By 2019, the US apparel retail industry is forecast to have a value of $457.6 billion, an increase of 22% since 2014.

Kohl's sells apparel for women, men and children under national, exclusive and private label brands at all its stores. During FY2015, the women's and men's business lines accounted for 30% and 20% of the company's revenues, respectively, a significant portion of which is apparel sales. With apparel market in the US growing, Kohl's is well positioned to generate revenues from its product offering.

Growing demand for private label brands

Demand for private label products has been growing in the US since last few years. These products provide customers with an attractive alternative to higher-priced national brands. Instead of buying expensive brands, consumers across the industry are turning to generic and private label products. Even upper-income shoppers are more willing to buy store brands, which has traditionally appealed more to shoppers with limited budgets. According to industry estimates, among all major US retail channels, private label sales increased by approximately 3% in 2014, whereas national brands sales grew by nearly 1% during the same period. In supermarkets, unit and dollar shares increased to nearly 23% and 20%, respectively.

The company offers a wide range of products under its private labels such as Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Life + Style. The change in customer preference and strong inclination towards private label products will enable Kohl’s to increase the sales of its own branded products. As these products have higher margins they will contribute to a strong bottom line.

Threats

Intense competition

The retail industry in the US is highly competitive. Kohl's competes with traditional department stores, upscale mass merchandisers, off-price retailers, internet and catalog businesses, specialty stores and other forms of retail commerce. The key competitive factors include style, quality, price, merchandise mix, brands, service, customer experience and convenience. The company competes directly with larger retail players such as Target, Wal-Mart Stores and Sears Holdings in many of the markets it operates. These retailers have large market presence and larger economies of scale, which provide greater power to negotiate for better margins with vendors. Therefore, the company will have to constantly differentiate itself from its competitors through efficient and in trend merchandising, and attractive promotional programs in order to retain its market share; otherwise, intense competition could drive away its potential and existing customers which could result in drop in its revenues and profit margins.

Increasing labor costs in the US

Kohl's Corporation Page 7 © MarketLine

Kohl's Corporation SWOT Analysis

Tight labor markets, increased overtime, government mandated increases in minimum wages and a higher proportion of full-time employees have resulted in an increase in labor costs for many of the employers. The federal minimum wage rate in the US, which remained at $5.15 per hour since 1998, increased to $5.85 per hour in 2008. It further increased to $6.55 per hour in 2009 and to $7.25 per hour in 2010. Many states and municipalities in the country have minimum wage rates even higher than the federal minimum wage rate due to the higher cost of living. For instance, in California, the minimum wage rate increased from $9 in 2015 to $10 in 2016; in Connecticut, the minimum wage rate grew from $9.15 in 2015 to $9.6 in 2016. The minimum wage rate increased from $8.23 in 2015 to $8.31 in 2016 in Colorado. Similarly, in Alaska, the minimum wage rate increased from $8.75 in 2015 to $9.75 in 2016; in Arkansas, it increased from $7.5 in 2015 to $8 in 2016; and in Massachusetts, the minimum wage rate increased from $9 in 2015 to $10 in 2016. Kohl's employed about 137,000 people as of January 31, 2015. Rising labor costs can increase the company's operating cost and adversely impact its margins.

Kohl's Corporation Page 8 © MarketLine

Kohl's Corporation SWOT Analysis

Copyright of Kohl's Corporation SWOT Analysis is the property of MarketLine, a Progressive Digital Media business and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.