The ath-leisure movement isn’t slowing down anytime soon, and Kohl’s Corp. is positioning itself to benefit from the trend.
Now Kohl’s is introducing collections to continue the momentum.
This month, the department store will launch Every, a plus-size collaboration with Nike to “further position ourselves as an active and wellness destination for the entire family,” Michelle Gass, chief executive officer, said on Thursday morning’s conference call. She called the collaboration a “big win.”
Kohl’s revealed it would open 10 Planet Fitness centers next to the retailer’s locations this year, with the possibility of more in the future, further positioning the store as an ath-leisure shopping destination.
“If I cut across all the categories, active is a priority,” Gass said. “We have deep partnerships with our partners, and frankly, the product elevation in every business — whether it’s women’s, men’s, kids’, footwear, you know that’s coming — and that will continue to lift for us.”
The company will extend its in-store active strategy to add a larger assortment in about 160 of its highest-performing active stores in 2019.
Kohl’s activewear business, which includes men’s and women’s apparel, makes up about 20 percent of the business and has accelerated every year since 2014, Gass said. Brands like Nike, Adidas and Under Armour are in demand across apparel and footwear categories.
Gass, who took over as ceo in May, said the women’s apparel business is also a “key priority,” which represents about 30 percent of the business. The category’s growth was something she said she was “really pleased” with in the last year.
In addition to activewear, highlights in women’s apparel include modern clothing, intimates, sleepwear, fashion accessories and beauty. Fashion boots like Uggs and jumpsuits are trending, as contemporary clothing brands like Lauren Conrad, the Elle brand and Vera Wang remain in demand.
Now the focus has turned to Millennials.
“We know we have a particular opportunity to gain share among Millennials, especially Millennial moms,” Gass said on the conference call.
One initiative is the outfit bar, which will be installed in about 50 stores in Chicago and Philadelphia. The pilot program will include clothes from beloved Millennial brands like PopSugar, Levi’s, Lauren Conrad and Adidas, and will be updated every month to “compel [Millennials] to come to Kohl’s,” Gass said.
And while women’s apparel is a high point for the company, so is men’s wear.
“It’s worth calling out that men’s reported its fifth consecutive year of positive sales, and has consistently been a top company performer driven by a great balance of national and proprietary brands, fabric innovations, pursuing opportunities, such as active, golf and big and tall, and smart inventory management,” said Gass, who doesn’t expect the men’s business to slow down anytime soon, either.
Investors seem to agree. The stock rose 7.31 percent Tuesday, closing at $71.33 a share, and is “likely headed higher,” Jay Sole, an analyst at UBS, wrote in a note Tuesday.
“The U.S. department store industry is largely mature, with large, well-capitalized competitors that can pursue market share from several different directions, [such as] specialty retailers, discount retailers and e-commerce retailers,” Sole wrote.
But Kohl’s might be the exception.
“[Kohl’s] is increasingly looking like a winner/survivor in the department store space and this could challenge some bearish views,” Sole wrote. “[Kohl’s fiscal-year] 2019 sales and operating margin guidance is mostly in-line with consensus. We doubt the market is going to significantly change its view of [Kohl’s] long-term earnings power.”
Still, executives said the company has work to do. Soft spots for the quarter included handbags, jewelry, juniors and women’s class apparel.
“Going forward and in partnership with Amazon, we’ve made the decision to transition from store-within-a-store concept to a more robust wholesale relationship with Amazon,” Gass said.
Kohl’s will continue to invest in its digital presence, with the majority of the traffic coming from mobile — about 70 percent.
The retailer will also continue to offer Kohl’s Cash with its Next Generation loyalty program.
“However, we’ve also learned that we do not need to be as generous with customer rewards,” Gass said. “Therefore, we’ll modify the program to optimize the rewards offerings to create the greatest impact.”