NEW YORK — Kevin Mansell was named chief executive officer of Kohl's Corp. Thursday, taking over from Larry Montgomery, who will remain chairman.
Mansell, 56, had been groomed for the corner office -- he's been president and a director since 1999 and will retain the titles-- but Montgomery is still passing the baton during what can only be described as a difficult time for middle market retailing.
The harsh consumer economy is sending shoppers in droves to Wal-Mart and offpricers such as T.J. Maxx, each of which picked up market share in the first half. J.C. Penney and Macy's are also sharpening their competitiveness, adding exclusive brands from major designers.
Montgomery, 59, will be a relatively involved chairman and continue to oversee the Kohl's human resources, legal and real estate departments. The new CEO adds responsibility for the firm's strategic initiatives, day-to-day operations and long-term growth plans. He already oversaw product development, logistics and store planning, merchandise planning and other key areas of the chain's business.
"They're running a very tight ship," said Richard E. Jaffe, retail analyst and managing director at Stifel Nicolaus. "They're operating very defensively with lean inventories. It doesn't maximize sales, but it preserves profits and in this environment being a little bit defensive is probably better than being on the offense."
Jaffe said the firm, with brands such as Chaps, was well positioned for their consumer, but that the moderate shopper is feeling stretched with high gas prices and falling home values.
The pressure on the Kohl's consumer is part economic reality, part psychological.
"This is not 1929 and yet, if you read some of the local papers, you'd think it was," said Jaffe. "Will their customer ever come back? Absolutely. They are an attractive alternative to both Penney's and Macy's."
Going into this year, the firm said it was looking for the combined percentage of private and exclusive brands to rise to as much as 41 percent of sales, driven by the growth of the Elle, Food Network and Simply Vera by Vera Wang brands, as well as new products from Bobby Flay, Jumping Beans and Fila Sport.
During the first half, Kohl's earnings dropped 18.7 percent to $389 million, or $1.26 a diluted share, on a 2.6 percent rise in sales to $7.35 billion. For the full year, the Menomonee Falls, Wis.-based firm is looking for profits of $3.02 to $3.18 a diluted share, down from the $3.39 last year. ³More than ever, it is important we remain focused on our four strategic initiatives: merchandising, marketing, inventory management and the in-store shopping experience," said Mansell in a statement Thursday. "We believe we are well positioned to continue to capture market share in this competitive and difficult economic environment."
Kohl's has 957 stores and its 1,000th on the way this fall, but expansion has slowed some. After opening 112 stores last year, the retailer plans to add 70 to 75 this year and just 50 next year.
Despite this slowdown, there was speculation that the company would move to pick real estate freed up by the flurry of retail bankruptcies, which include Mervyns, Boscov's and Goody's Family Clothing. Real estate has been a focus for Montgomery.
"The fact that Larry is staying on in some capacity I think is interesting," said Deborah Weinswig, equity analyst at Citigroup Global Markets. "I think part of the reason he is going to stay as involved as it sounds like he's going to is so he can make good decisions around real estate that's going to become available over the next 12 months. Think about Ames and Caldor and Bradlees, how well these guys did with picking up real estate."
Shares of Kohl's rose 0.5 percent, or 22 cents, to $47.96 Thursday. Over the last year, the stock has traded as high as $63.97 and as low as $36.81.
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