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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