SAN FRANCISCO--Kohl's Corp. is targeting 20 percent annual growth in sales and operating earnings over the next several years and is looking to strengthen its position in the moderate apparel market. "We're like a wedge between the department store and the discount chains," William S. Kellogg, chairman and chief executive officer, said at a MontgomerySecurities investment conference. Of the 20 percent projected sales growth, he said 15 percent would be from new stores and 5 percent from same-store gains.Kohl's, based in Menomonee Falls, Wisc., plans to add 16 stores this year, including 12 in October, and close the year with 108 in operation. The company will enter the markets of Dayton and Cincinnati, Ohio, with a total of three stores. The chain will also open its first stores in Holland and Saginaw, Mich. In 1995, Kohl's plans to open 20 stores, and enter the northeastern Ohio and Kansas City markets. With its second distribution center opened in Findlay, Ohio, Kellogg said the company can support about 200 more stores. Net income in the first six months grew 52.9 percent to $20.8 million, or 57 cents a share. Sales rose 18.2 percent to $600.3 million, with same-store sales ahead 9 percent. Over the last six years, sales have grown at an annual compound growth rate of 23 percent, and operating profit has grown 29 percent, according to Kellogg. He said Kohl's maintains sharp pricing by keeping a low cost structure to gain department store customers, and he said the chain's national brands get discount customers into his stores. He said the company has fewer departments than traditional department stores, but that his stores emphasize dominant assortments in a full range of styles, sizes and colors. Kohl's top 10 vendors account for 30 percent of sales and its top 50 vendors make up more than half of sales. Last year, apparel accounted for 56.2 percent of sales; accessories and shoes, 19.5 percent; soft home and housewares, 12.1 percent, and hardlines, 12.2 percent. The company plans to increase its private label to 20 percent of sales from 14 percent in 1993 over the next year to 18 months, Kellogg said. However, Kellogg said Kohl's mix "will always be dominated by brands." Major brands include Levi Strauss, Lee, Haggar, Nike, Reebok, Natural Issue, Oshkosh B'Gosh and Cherokee. Kellogg said half of apparel purchases in the U.S. are made in the middle market, representing sales of $50 billion to $65 billion a year. Kellogg sees a big benefit when the firm takes its credit card business, which accounted for 38 percent of sales last year, back in-house in September 1995. Citicorp Retail Services has administered the card since the company was acquired in a leveraged buyout in 1986. Kellogg sees this increasing sales and helping in the distribution of circulars. "Today we get zero revenue, and we pay a lot of money for Citibank to service it," Kellogg said. "Plus, that's our core customer, and we want to treat that customer well." --Fairchild News Service
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