KOHL’S MAKES ITS CALIFORNIA MOVE WITH PARCEL PURCHASE

Byline: Kristin Young

LOS ANGELES — The California Kohl’s Rush is set to begin.
After months of speculation and sightings in southern California, Kohl’s Corp. bought a 5.5-acre parcel of land in south Orange County — the first definitive sign that the department store chain is planning to enter the affluent market.
According to public documents, K & G/Regency II LLC sold the land in the city of Rancho Santa Margarita to Kohl’s for $4.4 million. The deal closed on Feb. 8.
Kohl’s is expected to build a store of just under 100,000 square feet in a new shopping center called Plaza El Paseo, according to sources. The new store — some speculate it could be a two-story unit — is expected to open by 2003 while the shopping center, developed by Regency Centers Corp., is slated to open by early next year.
Kohl’s is keeping mum on its future West Coast plans.
“We have not made any announcements about the southern California market,” said Susan Henderson, a spokeswoman for the Menomonee Falls, Wisc.-based retailer.
Real estate sources say that Kohl’s has been looking for parcels of land in southern California for between 20 and 30 stores — units the retailer expects to open at the same time in 2003. Kohl’s first preference is to buy land and build stores but the retailer has not ruled out moving into existing properties in tighter real estate markets such as Los Angeles.
While Los Angeles is considered a top choice, Kohl’s has been spotted scouting several territories in outlying areas, including spots in Anaheim, Temecula, Ventura, Carona, Santa Clarita, Downey, as well as the Inland Empire — a vast area that includes Palm Springs and adjacent Riverside, San Bernardino and Ontario counties.
“They’ve been active in the market and they’ve been speaking to us to put a location within the Irvine Ranch,” said Jeff Dodd, vice president of leasing at the Irvine Company’s retail division that owns 30 shopping centers in Orange County, including the Irvine Spectrum and Fashion Island.
The retailer is also reportedly interested in other first-tier markets such as South Bay, Long Beach, Westside and San Gabriel Valley. But finding real estate in those markets is almost as difficult as Los Angeles.
Meanwhile, observers say Kohl’s entry into southern California could change the retail landscape, giving some competitors a run for their money.
“The sound you hear is the teeth chattering of mall managers who have either a Penney’s or a Mervyn’s or both in their malls,” said Jack Kyser, chief economist at the Los Angeles Economic Development Corporation.
Kohl’s is one of the fastest-growing retailers currently in the U.S. The retailer is in the process of opening between 55 and 60 stores this year. In addition, Kohl’s said it would acquire 15 former Bradlees stores, including 12 in the Boston market to accelerate its penetration in New England, and three stores in New Jersey, a market the retailer entered last year.
In March, Kohl’s will open 18 stores, including an entry into the Atlanta market with 15 units. Sixteen stores are planned to open in April and between 21 and 26 are slated to launch in the fall, primarily filling in stores in existing markets, according to the retailer.
Last spring, the chain entered the Northeast region with 22 stores in New York, Connecticut and New Jersey.
Kohl’s operates 320 stores in 26 states. Until now, locations in Colorado and Texas were the furthest west the chain went.
Sales increased 33.2 percent to $3.9 billion for the nine months ended Oct. 28. Some $772 million is attributable to 46 new stores that opened in 199 and 61 new stores that opened in 2000. Net income for the nine months increased 40.8 percent to $193.7 million.
Kohl’s isn’t the only one interested in southern California. Two European chains, Hennes & Mauritz and Zara, recently approached Candace Rice, a senior vice president at Donahue Schriber, a firm with 50 shopping centers west of the Rockies, she said.
Both chains have said they are concentrating on filling in niches on the East Coast but Rice said such meetings indicate a West Coast presence may not be far off.
Zara operates six stores in New York. H&M currently operates 10 stores in New Jersey and New York with plans to open 20 to 25 stores stores on the East Coast sometime in the next two years.
“I think there’s a need for new concepts, new names and new merchandise,” Rice said. “We need a point of difference in our merchandising and the retailers that bring that to the developers will be very successful.”

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