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Brand AuditChey NavarroSpring 2016
Company Analysis
Mission
Max Kohl opened the first Kohl’s Department Store in Brookfield, Wisconsin in 1962.
This Kohl’s was positioned between the higher-end department stores and the discounters,
selling anything and everything from a pack of gum to home appliances. As of 2013, Kohl’s was
America's largest department store chain by the number of stores and the second largest U.S.
department store company by retail sales. It has also maintained a high position in the top 100
Retailers (Top, 2013).
Kohl's mission is to be the leading family-focused, value-oriented specialty department
store offering quality exclusive and national brand merchandise to the customer in an
environment that is convenient, friendly, and exciting. In all of the company’s operations, Kohl’s
strives to “embrace the core values that have long defined [their] mission. [They] look toward
the future, but remain principled in the past. Kohl’s promise to their customers to “expect great
things,” and the company keeps this promise through excelling in what is called the “Greatness
Agenda.” The Greatness Agenda is “a strategic framework built on five pillars; amazing product,
incredible savings, easy experience, personalized connections, and winning teams.” The
company aims to achieve the goal of becoming the most engaging retailer in America by
building “genuine, lasting relationships with customers, designing easy, seamless shopping
experience no matter how the customer shops, and by helping customers get more from every
dollar they spend at Kohl’s,” (Purposes, 2015).
Corporate Culture
The mission to inspire and empower families to lead fulfilled lives is not limited to their
customers, but also includes their associates. Kohl’s values consist of four main factors: putting
customers first, acting with integrity, building great teams, and driving results. By putting the
customers first, the company views them as a constant source of inspiration and guidance. They
also support the communities and causes the customers and associations are passionate about.
Kohl’s also has a strong regard for integrity and believes in treating others with respect and
fairness while making decisions to uphold the reputation of the organization. To build great
teams the company communicates openly and embraces diverse perspectives, actively promotes
empowerment, engagement, and continuous development, and recognizes and celebrates
greatness in all associates. Lastly, to drive results, they work with a sense of urgency and
accountability, seek out information to make the best decisions, and offer innovative ideas and
solutions beyond the status quo (Our, 2014).
According to glassdoor.com, 59% of
employees would recommend their job to a
friend and 70% of the employees approve of
the CEO of the company. In the 10,000+
reviews, the company received an overall
rating of 3.2 out of 5 stars. The following
diagram breaks down the company’s ratings
and trends according to Kohl’s employees
across the nation. The overall distribution indicates the company has successfully maintained
associate satisfaction throughout the years, (Kohl’s Employee, 2016).
Ambitions
Kohl’s has proven to be a very ambitious brand with their up and coming endeavors. The
company will be replacing its competitor J.C. Penney’s as the sponsor for the 2016 Academy
Awards. For 14 years, J.C. Penney’s had been the sponsor of the Oscars, but Kohl’s has decided
to cease the opportunity to capture markets and emphasize the brand. Kohl’s collaborated with
Anomoly and Huge on this campaign to create a 60-second spot and four 30 seconds. Prior to
these television spots due to air during the broadcast, the company is launching a digital
campaign with the hashtag #allthegoodstuff to promote the launch. According to Will Setliff,
executive VP-Marketing, "It isn't about the glamor, it's about the human emotion of having
accomplished something with the help of everyone -- that's the connection we want to create
with the Oscars." Not only does the company aim to establish the connection between the
viewers and their brand, but they are also hoping to capture the attention of new markets such as
millennials and Hispanics, (Pasquarelli, 2016).
In addition to this endeavor, Chief Executive Kevin Mansell has plans to increase sales to
$21 billion by the end of 2017. To reach this goal, new concepts will be introduced with the
addition of more national brands, women’s accessories and shoes, and an extension to the beauty
department, (Dow Jones, 2016).
Potential Risk
With the increased popularity of online shopping and other buying options, department
stores have experienced pressure from not only the consumer market, but also the stock market.
Shares of major department-store chains fell nearly 37% in 2015, while the overall S&P 500
Index fell just 0.7%. This lead investors to start abandoning the brick-and-mortar businesses to
focus their ventures and attention into the online shopping market. This poses a great risk for
Kohl’s as their shares are down 40% from their high of $79.07 in the previous year, (Dow Jones,
2016).
Kohl’s directors are addressing this risk and considering hiring investment banks to give
direction on whether or not to follow the smaller department-store companies and include a sale
to a private-equity firm. Further discussion is currently in place to identify alternatives for the
company, (Dow Jones, 2016).
Financial, Technological, Managerial Resources
Financial Resources
The Kohl’s Corporation website provides users with the ability to view the 2014 annual
report and currently the 2015 Proxy Statement. The annual reports indicated $19.03 billion in
sales for the 2014 fiscal year, 1% down from the previous year, and $19.02 billion for the 2015
fiscal year. In addition to these files, the corporation provides financial data dating back to 1995
as well as brief descriptions of reports and their filing date, (Financial, 2015).
Technological Resources
Kohl’s customer engagement model is founded on three essentials: deliver products that
surprise and excite customers; provide an easy experience and engage with customers on a
personal level; and ensure that customers get what they want through various fulfillment
methods. According to Mike Molitor, senior vice president of e-commerce, “We’re investing a
lot of time and money figuring it out. One part of it is using data and analytics to segment and
better understand our customers. Another is to personalize messaging and offers throughout the
customer decision journey. Then there’s the loyalty piece of it. You use your loyalty program to
engage with your most-valued customers on a more personal level.” At Kohl’s Digital Center,
Molitor and his teams are engaging in a number of primary focus areas to uncover this
knowledge, one of which is mobile phones. In the wake of department stores being overlooked
due to online shopping, Molitor saw an opportunity for advancement. Research is currently
being conducted on how to overcome this obstacle; one possibility currently being discussed is
the option of mobile checkout. Molitor believes waiting in line is a common inconvenience and
aims to find time to reduce cycle time in the store. (Monthly, 2016).
Managerial Resources
Kohl’s Board of Directors have years of experience in the retail industry who have each
held a number of positions within the company. Their team of senior executives includes
experienced leaders who strategically focus on the long-term advancement of their business,
upholding their corporate responsibility, and improving products through continuous innovation.
These executives and members are very committed to responsible business practices.
Efficiency is kept at the forefront of the business; in 2006 a formal program was created with
sustainable operations as the foundation. Kohl’s advocates partnerships with leaders in
sustainability; not only are customers and associates encouraged to consider environmental
responsibility, but local and national partnerships collaborate to identify sustainable practices to
be enacted by all involved, (Purpose, 2015).
Sales Trends (3 years)
Kohl’s is operating in a highly competitive market, but remains one of the 20 largest
retailers in the United States. Over the course of the past few years, sales have fluctuated for the
company in both a positive and a negative direction. These trends are largely dependent on
economic conditions, product differentiation, and product quality. The following information is
from Kohl’s Q3 Factbook (Purpose, 2015). The sales trends for the past five years are as follows:
YEAR SALES/REVENUE
(BILLIONS)
GROWTH PERCENTAGE
2011 18.39 n/a
2012 19.8 2.2%
2013 19.28 2.5%
2014 19.03 (1.3%)
2015 19.02 (0.05%)
Profitability
Though sales may have flattened and the value is less than it was in previous years,
Kohl's is still a profitable company. Compared against their competition, in 2014, Kohl’s net
profit margin exceeded the top competitor’s, as shown in the figure below.
Analysts are optimistic about the company’s profitability predicting to earn about $837
million in the current year, and generating more than $700 million in free cash flow, (Dow
Jones, 2016).
Market Share
Kohl’s capital management has resulted in a strong balance sheet and the ability to return
value to the shareholders through dividends and share repurchases. The first quarterly dividend
was paid in February 2011 at $0.25 per common share, to $0.32 in 2012, $0.35 in 2013, $0.39 in
2014, and $0.45 cents in 2015. Kohl’s also has an active share repurchase plan. Since 2006, they
have repurchased roughly 50% of the company’s outstanding stock which translates to $170
million shares costing $9 billion dollars, (Purpose, 2015).
Industry Sales Trend
Measured by revenue reports, the United States is the undisputed leader in the retail
industry. 76 of the largest retailing companies in the world are based in the U.S. and 81 chains’
revenues are large enough to qualify them for the 2014 World's Largest Retailers list in 2014.
According to the U.S. Census Bureau, total annual U.S. retail sales have increased an average of
4.5% between 1993 and 2015, (Monthly, 2016).
Economic Climate
Economic factors tend to have a domino effect in all industries, especially those who sell
products or services. A decrease in unemployment rates and increases in employment gains,
among many other factors, result in a healthy economy; a healthy economy correlates to an
increase in consumer’s disposable income therefore an increase in consumption overall.
Increases in consumption allows retailers to adequately sell more of their products and increase
revenues overall. The Economic and Commodity Forecast of December 2015 predicts Real GDP
to grow 2.5% over the following year. According to the Bureau of Labor Statistics, consumer
spending in 2014 reached an all-time high in over eight years which encouraged businesses to
increase production across all boards, (U.S. BLS, 2014). Consumer spending is expected to
continue to increase along with Real GDP. Specific to this research, retail sales are predicted to
be .29% by the end of this quarter. In the long-term, the U.S. Retail sales trend is projected to
trend around .35% in 2020, (Taborada, 2016).
Social, Cultural, Political Conditions
Changes and trends in social values as well as government policies and regulations effect
the products retailers sell and how those retailers relate to consumers. The retail industry is often
under pressure to develop environmentally responsible business practices and engage in socially
acceptable marketing practices. The government and consumers are quick to respond if
businesses do not follow these supposed guidelines, whether it is legally or morally driven.
Overall, Kohl’s has accurately followed these guidelines, but some practices have not slipped
through the cracks as well as the company had hoped for. A very popular public relations issue
surfaced when Kohl’s advertised a men’s parka and a fur lined hand bag with the description of
“faux fur.” An investigation by the Human Society of the United States found that these items
did in fact use real fur from raccoon dogs and rabbits, respectively. In response, Kohl’s claimed
negligence, apologized for the misinformation, and pulled the products from the stores. The
company honored returns and sent out a formal apology, but received backlash from animal
activists and buyers of products not associated with the fur trade cruelty, (Network, 2014).
Consumer Analysis
Demographics, Psychographics, Usage, & Motivations
An analysis conducted by Ad Age revealed the demographics of Kohl’s guests to
determine the company’s target market. The analysis identified gender, age range, marital status,
annual household income, and U.S. census region as important factors to segment the market.
Kohl’s merchandise mix includes 30% women’s clothing and a 50/50 split percentage between
national brands and private/exclusive brands. These brands are divided into 40% modern classic,
36% classic, and 24% contemporay, (Purpose, 2015). Business Insider also found that Kohl’s
has been voted women’s most popular place to shop for clothes since 2013, (Peterson, 2015).
Considering this combination, it is no surprise that Kohl’s consumers were found to
predominatly be married women between the ages of 35 and 54. The annual household income
earns between $50,000 to $74,999 and a majority reside in the midwest region of the United
States, (Carmichael, 2012).
The quality of Kohl’s products and the variety of brands offered is key in distinguishing
itself from competitors in the discount retail industry. Although Kohl’s is categorized as a
discount department retailer, their consumers are not the typical coupon-cutting, bargain
shoppers. These consumers are more affluent than those of Wal-Mart, but are still cost-conscious
shoppers. By emphasizing the high-quality merchandise, national brands, and lower-cost
designer fashion, Kohl’s typically appeals to the consumers who are brand oriented individuals.
These consumers are motivated by their desire for high quality and high style while still being
mindful of the prices. They tend to be educated individuals who are loyal to the brands offered
by Kohl’s, but are less likely inclined to pay full price for brand name merchandise. When
making purchases, they expect satisfaction and trust that Kohl’s will uphold their mission in
delivering the higher standard products. These consumers admire quality, trust, and value in their
everyday lives and in their purchases, (Kohl’s Reviews, 2016).
From home appliances to the latest lower-cost designer fashion, Kohl’s consumers
utilized their products in their everyday lives. Consumers feel they can trust Kohl’s to meet their
fashion needs along with limited needs for home décor.
Lifestyles: Attitudes, Values, Passions, Routines, Structure, & Influence
The Kohl’s customer is a working woman with a busy work life and a desire for fashion.
Her budget may not allow her to acquire high fashioned merchandise, but her drive and
sophistication does not stop her from looking her best at all times. She has a level head on her
shoulders and knows how to balance and budget work and play. Her purchases of Kohl’s
merchandise reflect her life. She values her appearance and her earnings. She is the ideal mix of
smarts and sophistication. She is brand loyal, but cost conscious, and makes economic and
educated decisions in her purchases, (Peterson, 2015).
Competitive Analysis
As previously noted the retail industry is highly competitive and highly reactive. With
such a vast market, it is essential for businesses to differentiate themselves within the market.
The two market segments relevant to Kohl’s are department stores and mass merchandisers.
Kohl’s primarily competes against other department stores such as J.C. Penney’s, but also has
increasing secondary competition from mass merchandisers such as Wal-Mart and Target.
J.C. Penney’s, Kohl’s most direct competitor, maintains a similar presence in the retail
industry, however in regards to sales, they are falling slightly behind. While Kohl’s generated
$19.02 billion in sales in 2015, J.C. Penney only generated $12.23, (JCP, 2015). Although the
products sold and the target markets are very similar to that of Kohl’s, J.C. Penney’s recently is
primarily capturing an older audience. Only 20% of the customers are under the age of 35, while
over 36% are over the age of 50. 29% of these customers’s annual income is less than $35,000
which concludes that these shoppers are relativly price sensitive and a part of the older
generation, (Stock, 2014). According to the Huffington Post, J.C. Penney does not allign well
with customer expectations and their dropped sales in 2013 reflected this. Among the many
mistakes J.C. Penney’s made in their lack of resonsivenss to the consumers, they company sold
more merchandise target towards younger, thinner consumers leaving their typically targeted
market with a loss to find their fit, (Roman, 2013).
Walmart Corporation is one of Kohl’s indirect competitors. Although Wal-Mart promises
the lowest prices on their products, their products are often found to have less quality. Wal-Mart
markets to a lower income level than Kohl’s, however, the two companies do share a somewhat
common market segment, consumers who are price sensitive. Consumers expect adequate
quality and lower prices from Wal-Mart which falls short of the company’s expectations.
However, Wal-Mart did not fall short in sales as 2015 brought in $485.7 billion in revenue,
(Wal-Mart, 2015).
Target is a secondary competitor as well. Target’s customers share a more similar
demographic with Kohl’s than does Wal-Mart. Target identifies their primary customers as
middle class individuals with a median age of 40, median household income of approximately
$64,000, approximately 43% with children at home, and about 57% that have completed college,
(Target Corporation, 2015). Target Corporation has experienced an increase in sales over the
past 3 years. 2013 generated revenues of $73.3 billion dollars and as previously stated, $71.3
billion in sales for the 2014 fiscal year. 2015 generated the sales of $72.62 billion dollars,
(Target Corporation, 2015). Target has proven to be aligned with their target market as they are
often perceived as the “classier Wal-Mart,” (Target Reviews, 2016). The Target brand is more
sophisticated and, like Kohl’s, is associated with higher quality and lower price.
Brand Analysis
At a net value of $16 billion dollars, Kohl’s was listed as number 652 on Forbe’s Global
2000 list, (Marketcap, 2015). This is favorable for the brand as it proves the company has the
ability keep their brand promise and deliver satisfaction and value to the consumers. Consumer’s
expect to receive high quality in their products and Kohl’s delivers exactly that.
The Kohl’s brand’s convenient yet sophisticated personality evokes satisfaction and
happiness in its consumers in their product offerings (@kohs, 2016). Overall, Kohl’s has been
successful in establishing a positive image in the consumers mind proven by their impression
score in the BrandIndex data. This score is determined by asking consumers, “Overall do you
have a positive or negative
view of this brand.” The
below images displays
Kohl’s brand impression
compared against its
primary competitor J.C.
Penney, (BrandIndex,
2014).
The brand’s simplicity and elegance resonates throughout the consumer’s perception of
the brand’s personality and the brand’s essence overall (@kohls, 2016). When asked to describe
Kohl’s as a brand, several consumers used adjectives such as clean, stylish, and affordable
(Kohl’s Reviews, 2016). Not only were these the most popular adjectives used to describe the
brand, but they also encompass three different aspects of the company; the store’s quality,
products, and pricing, respectively. This supports that Kohl’s is keeping their brand promise for
the customers to “expect great things.”
Appendix
Kohl’s Logo
Kohl’s Mobile
Kohl’s Coupons
Kohl’s Print Advertisement
Kohls.com
Kohl’s Corporate
References
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