Kohl's Gets a Beauty Boost from Store Remodels

Kohl's store remodel program is paying off, with refreshed beauty departments contributing a significant increase in sales.
The retailer opened three new stores in Q3, bringing the year's total to 12, and has remodeled 30 more with plans in 2014 to renovate between 35 and 50 stores. "The wider range is to allow us flexibility in our rollout of beauty, as well as give us the opportunity to test additional store refresh concepts throughout the year," CEO Kevin Mansell recently told analysts.
Roughly 280 locations got one of three makeover formats just in the beauty department. Some departments were expanded and outfitted with new fixtures. Others received new fixtures in their existing footprint, while a final group got new acrylic overlays installed on their existing fixtures. According to Mansell, the brands are selling well and even outperforming expectations. "Although it's very early, we have seen significant beauty sales increase in the renovated stores," he added.
The remodels wrapped up just in time for the holidays as Kohl's positions itself as "Black Friday destination."
"We want to be shoppers' first stop for everything they need on Black Friday and throughout the season," said Mansell. "Even before Black Friday, we're showcasing how we have what she needs throughout the season, including entertaining and toys." The retailer claims to have engaging events and campaigns as well as enticing products up its sleeve this holiday.
Kohl's beta loyalty program has expanded from Texas into California and the Pittsburgh metro area, now reaching approximately 30% of customers, but changes are afoot, Mansell reported. After crunching the numbers, the retailer discovered the loyalty program in its current iteration is driving just a single-digit sales lift when compared with control groups.
Recent hire Michelle Gass, a Starbucks alum, believes the loyalty program is a solid foundation from which to build an offering that's even more engaging for customers. "She has some very specific ideas, and that's going to take some time," Mansell noted. The company will continue to expand the loyalty program to additional markets in the spring even as internal stakeholders look for ways to improve the platform.
"It's definitely going to be a different loyalty program than we currently have today," said Mansell.
Kohl's e-commerce business experienced a hiccup in the third quarter as it switched to a new platform. Sales growth for Q3 finished at 15%; solid — but not up to its usual standards of growth upwards of 30%. The greatest slowdown occurred in August and September and coming out of October, both traffic and conversion are beginning to return to their usual historical levels. Mansell sees the replatform as a necessary step in the company's long-term plans. "It's not a fourth-quarter initiative, it's a next-three-years initiative that we just went through," he explained.
Kohl's CapEx is set to finish out around $725 million for the 2013 fiscal year, and the first 9 months of the year saw $465 million in spending, $176 million less than the same period in 2012. Lower spending on fulfillment and fewer store remodels contributed to the decrease,
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