Byline: Nancy Brumback

MILWAUKEE — Buoyed by its strong entry into the New York metropolitan area this spring, Kohl’s is continuing its expansion with another 21 stores opening this fall, including the first in the Tulsa market, and, in 2001, its first push into Atlanta and the launch of an e-commerce initiative.
During the annual meeting here Tuesday, Kohl’s executives credited the associates in the stores for much of the chain’s success. In attendance were one employee from each of the 298 stores, four distribution centers and home office, who were introduced as a group before the directors and executives.
However, the family atmosphere of the annual meeting was interrupted by about 35 people who picketed outside as shareholders and employees arrived. The protesters called attention to sweatshop conditions at offshore apparel plants and supported a stockholder resolution from the Sisters of St. Francis of Assisi and Cardinal Stritch University that requested Kohl’s to report on its international operating principles and methods of compliance. The resolution received less than 8 percent of the shareholders’ votes.
The pickets and a speaker at the meeting also protested conditions at a specific plant in Nicaragua that makes jeans Kohl’s buys for its Sonoma private label program, charging workers have been fired for union activities.
Kevin Mansell, Kohl’s president, emphasized the chain takes human rights issues very seriously, already has a long-standing policy and procedures in place and has hired PriceWaterhouseCoopers and International Testing Service to conduct independent investigations of manufacturing facilities. He added a PriceWaterhouse investigation of the Nicaragua facility did not substantiate the speaker’s claims.
Before the meeting, Rick Leto, executive vice president and general merchandise manager, apparel, told WWD that the spring season for women’s apparel has been “very, very strong,” driven by cut-and-sewn knit tops and shorts. For fall, “there’s still a lot of life in the fine-gauge sweater business, and we have not yet seen the end of the importance of stretch fabrications,” as well as other new fabrics with a nice hand.
Kohl’s added Columbia brand sportswear and outerwear this spring, and Mansell told shareholders Columbia, and Arrow dress shirts for men, added at the same time, would both be in the chain’s top 20 brands during their first year.
“Everyone knows Columbia outerwear is outstanding,” said Leto, “but the sportswear portion has exceeded our initial expectations dramatically. Women’s has been incredibly strong.”
For the back-to-school season and to attract the “Generation Y” shopper, both male and female, Kohl’s will add shops in July in its seasonal display space featuring loungewear, bath and body products, soft home furnishings, and frames and other decorative home accessories.
Mansell told shareholders Kohl’s will continue to emphasize branded merchandise, which makes up about 80 percent of sales. By product category, Kohl’s sales are women’s, 29 percent; men’s, 21 percent; home, 19 percent; kids’, 13 percent; footwear, 10 percent; and accessories, 8 percent.
Kohl’s plans to start selling merchandise online next year and is currently working to completely integrate online shopping with its stores, Mansell said, adding that the company expects to control all aspects of the business.
The first criteria, he noted, is that the venture “must be profitable. We will not commit major investment dollars until we have developed a model we feel will give us the same return on investment as a new store. With the low-cost culture we have at Kohl’s, we can find ways to run this business more cost-effectively than people who are out there today.”
Acknowledging Kohl’s lacks the advantage of some competitors who already had a catalog operation when they ventured into e-commerce, Mansell said the company had considered using a third party for fulfillment, “but that’s way too important to rely on someone else, so we will lease our own facility and run it with our own staff.”
To insure brands and pricing are the same in the stores and online, Kohl’s plans no duplication in buying staffs, will have its credit card call center handle e-commerce calls and will market its online service in the same media as the stores, he said. Customers will be able to return or exchange online purchases at the stores.
But, Mansell added, “our major vehicle for growth is still the expansion of our store base.”
Larry Montgomery, vice chairman and chief executive officer, said that, in addition to the 39 stores opened this spring, Kohl’s plans another 21 in the fall, including its first three in the Tulsa market and three more on Long Island, along with fill-ins in existing markets.
In 2001, another 55 to 60 stores are planned, including the first in the Atlanta market. Except for one location, the 12 or 13 planned for Atlanta will be new buildings, Montgomery said. A new distribution center, in Chester, N.Y., will also open next year.
Kohl’s, said Montgomery, has been very pleased with the initial reception of the stores in the New York-New Jersey-Connecticut market. “Traditionally, we open stores at an average volume of 70 to 80 percent of a mature store. The numbers out of the tri-state stores are running close to 100 percent of mature store volume, which is just a shade under $19 million,” Montgomery told shareholders.
He sees “significant opportunity” for expansion in that market, pointing out the Chicago market, with about 8 million people, has 30 Kohl’s stores, while the tri-state area has 20 million people and only 32 Kohl’s stores now.
After the meeting, Montgomery said it is too early to predict the outcome of the Christmas season yet: “You’ll start to see positive or negative momentum after Labor Day.”
But, he added, Kohl’s performs well in good times and in economic downturns: “We do the best job of taking market share from other people and will continue to do that.”