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Kohl’s Future: Expansion and Exclusivity

At its annual shareholders' meeting in Menomonee Falls, Wis., on Wednesday, Kohl's emphasized expansion and the development of exclusive merchandise, while crowing about strong financial results.

At its annual shareholders’ meeting in Menomonee Falls, Wis., on Wednesday, Kohl’s emphasized expansion and the development of exclusive merchandise, while crowing about strong financial results.

For the 12 months ended Feb. 3, net income at the 834-unit chain increased 31.7 percent, to $1.1 billion, compared with $842 million the previous year. Earnings per share increased 36 percent in fiscal 2006 versus fiscal 2005. Total sales advanced 16 percent, to $15.5 billion from $13.4 billion in the year-ago period. Comp-store sales rose 5.9 percent.

Kohl’s, which opened 85 units last year, plans to unveil 110 to 115 stores this year, including stores in new markets such as Idaho and Wyoming. Kohl’s has said it plans to operate more than 1,200 stores by 2010. The company said it believed all regions in the U.S had significant growth potential.

The retailer in the fall introduced a prototype that features new merchandise displays for fashion trends, directional signing, larger fitting rooms with lounge areas and redesigned customer service and checkout stations. The store design is being implemented in new stores as well as renovated units.

Like all retailers, Kohl’s is hungry for exclusive merchandise. The department store chain sells Sag Harbor, Gloria Vanderbilt, Nike, Adidas, Nine & Co., Lee, Levi’s, Jockey and proprietary labels Daisy Fuentes, apt. 9, Croft & Barrow and Sonoma.

Competitors such as Wal-Mart, Sears and Kmart have opened design offices in New York in recent years to build relationships in the apparel and manufacturing industries and source exclusive products. Even Goody’s Family Clothing, a regional retailer based in Knoxville, Tenn., established a design office in Manhattan last year to provide direction and product development.

Kohl’s said it would follow suit and planned to open a New York design office “to support exclusive brands such as Chaps, Candie’s, Elle and Simply Vera” by Vera Wang, which is being launched in the fall. Industry sources have said that Simply Vera could develop into a $500 million business for Kohl’s by the third year.

The company identified its “two most important initiatives for 2007″ as partnership with Vera Wang, which extends to several product categories beyond sportswear, such as accessories, jewelry, footwear and intimate apparel, and with the Food Network for home goods.

Brands available only at Kohl’s now make up 7 percent of the company’s offering. Kohl’s said exclusive products would contribute to market share gains and it would work to get a bigger share of customers’ wallets in 2007 by developing cross-shopping strategies.

Kohl’s shares on Wednesday closed at $73.93, down 71 cents on the New York Stock Exchange.