Kohl’s details its Sephora makeover for 2022

Discussion
Photo: Kohl’s
Feb 16, 2022

Sephora at Kohl’s shops have been a success, and remodels are underway to add 400 of the beauty concepts inside the retailer’s stores this year.

Kohl’s has published a list of the locations across 36 states that will get a Sephora store-within-the-store, bringing the total of Sephora at Kohl’s to 800. The retailers plan to add another 200 next year, exceeding the 850 initially predicted when the 2,500-square-foot shop-in-shop concept was first announced in 2020.

“The quick and vast rollout of Sephora at Kohl’s is a testament to how much we believe in this partnership and making prestige beauty more accessible to people everywhere,” Doug Howe, Kohl’s chief merchandising officer, said in a statement.

Kohl’s CEO Michelle Gass has called the deal with Sephora “a game-changing partnership for us.”

Ms. Gass, speaking on Kohl’s third quarter earnings call in November, said the stores with Sephora shops have seen “extraordinary growth” in beauty sales.

The shops have also brought in new customers, with 25 percent of those coming for Sephora being first timers for Kohl’s. These new shoppers, who are younger and more diverse than the typical Kohl’s shopper, are not just buying cosmetics. Stores with Sephora shops have seen mid-single-digit sales growth.

“Roughly half of our customers buying Sephora are attaching at least one other category in their purchase across all of our lines of business,” said Ms. Gass. “We’ve already started to see customers return, which is encouraging and is expected to build as they get to know Kohl’s. From the outset, this partnership was structured to drive joint success, and we couldn’t be happier with how our teams are collaborating.”

The timing of Kohl’s announcement is intended to build anticipation among consumers where the new shops will be located. It also addresses challenges from activist investors impatient for bigger returns on their holdings.

The company is seeking to beat back Macellum Advisors’ attempt to take control of its board and force the retailer to split off its real estate assets and/or its ecommerce operations from its physical stores. Macellum has also advocated for an outright sale of Kohl’s, should it find a buyer for its business. Kohl’s recently adopted a poison pill provision to ward off would-be acquirers after receiving unsolicited bids.

DISCUSSION QUESTIONS: Will the new customers being brought in by Sephora have a significant effect on Kohl’s brand reputation and a material effect on its sales and earnings? Do you think Sephora at Kohl’s shops are a blueprint for future partnerships that Kohl’s will seek to develop?

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"Sephora brings a fresh demographic to Kohl’s. Hopefully future partnerships with be just as strategic. "

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11 Comments on "Kohl’s details its Sephora makeover for 2022"


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Mark Ryski
BrainTrust

Yes, the Sephora rollout will have a positive impact on sales and that’s the reason they’re rolling it out to 800 stores. As we have been seeing with other retailers/brands, partnerships like these can produce terrific results. I also can’t help but wonder if the timing of this rollout wasn’t accelerated to send a message of progress to the activist investors? In any event, this seems like a smart move that will prove to have a positive impact for Kohl’s. Now, on to the next initiative.

Neil Saunders
BrainTrust

Sephora is a fantastic addition to Kohl’s and it will certainly pull in foot traffic and drive some sales. However the partnership does not solve all of Kohl’s other issues. After all, Sephora was in J.C. Penney for many years and consistently failed to lift the rest of the store because J.C. Penney never did enough work to elevate and make their wider proposition relevant. I am not suggesting Kohl’s situation is as dire as J.C. Penney – it isn’t – but it needs to capitalize on the benefits Sephora brings by looking inward to improve its own business.

Liza Amlani
BrainTrust

Sephora at Kohl’s is doing exactly what a great partnership is supposed to do – serve its new and loyal customers with delight.

The partnership is a blueprint and success story for more partnerships and other retailers can learn from the Sephora/Kohl’s rollout.

I’d love to see how Kohl’s can learn from the customer shopping behaviors and trends to help serve their own assortment strategy. It would be a perfect partnership if both brands share insights to serve the customer with the right product at the right time and in the right channel.

This is a tremendous opportunity to catapult Kohl’s into overdrive – to invest in other categories across their footprint.

Melissa Minkow
BrainTrust

This may work to bring Kohl’s customers into the Sephora fold, but it will be tough for this to bring Sephora customers into Kohl’s. To bring in Sephora customers, there will have to be exclusive items that customers can’t get at a typical Sephora, and the locations will have to be in places where there isn’t a close enough Sephora. I think online promotions for in-store use could be of key assistance in driving market penetration.

Nicola Kinsella
BrainTrust

Sephora brings a fresh demographic to Kohl’s. Hopefully future partnerships with be just as strategic. But it’s important that Kohl’s looks at the rest of its merchandising strategy to capitalize on this additional foot traffic and appeal to this new shopper. I think the store-within-a-store model has a lot of potential if Kohl’s gets it right.

Dave Wendland
BrainTrust

You are spot on, Nicola. Placing a shiny new object inside Kohl’s without the rest of the store reflecting this new hip and energetic demographic will be a missed opportunity. I expect to see exciting store-wide transformation (and other emerging partnerships) taking center stage. Exciting times for this retailer and the consumers who favor Kohl’s!

Gene Detroyer
BrainTrust

I am surprised. I never would have anticipated this apparent success.

I do love earnings calls. “The shops have also brought in new customers, with 25 percent of those coming for Sephora being first timers for Kohl’s.” Forgive me for being cynical, but, how many is the 25 percent?

On the other hand, this is a no-brainer for Sephora. They triple their locations with minimal investment generating considerable incremental revenue.

Harley Feldman
BrainTrust

This partnership is a success already and will continue based on the forecast of 1,000 stores by next year. While the announcement of the partnership results has not had a large positive impact on its stock price, the increased sales with Sephora products, especially with new customers, will have a positive effect over time. The timing of the announcement was likely due to the Kohls unsolicited purchase attempts.

Assuming this partnership goes well, Kohls will likely look for other partnerships.

Craig Sundstrom
Guest

Looks great!! Just like, well, like the old JCP setups — which should come as no surprise since Sephora had a well established image it is wise to keep. My only thought is whether the significantly smaller size of Kohl’s — again, in relation to the former Penney’s — will ultimately result in some compromise(s), either to the size of the Sephora spot or the remaining Kohl’s space.

Brian Delp
BrainTrust
5 months 30 days ago

All you see when entering a Kohl’s store now is brand after brand. Sephora is only one part of a master plan to cement itself as a department store destination. Offering national brands like Sephora, but also Cole Haan, Calvin Klein, and the new drop-in Draper James are one way Kohl’s is able to differentiate from mass merchants like Walmart while stealing share from Macy’s.

Anil Patel
BrainTrust

Kohl’s+Sephora partnership will definitely help Kohl’s to enhance its brand reputation. To leverage the most out of the partnership, Kohl’s would have to understand Sephora’s customers and make sure their product lines cater to Sephora’s customers as well. However, for constant increases in earnings and sales in the future, Kohl’s should ensure that they are not solely focused on increasing foot traffic at stores. They might need to redefine their ICP and fine-tune their brand experiences to retain the newly acquired consumers of Sephora.

Kohl’s partnership with Sephora is a blueprint for Kohl’s future partnerships. When Kohl’s:
a) aligns the needs of existing and newly acquired Sephora’s customers;
b) tests the viability of the collab at stores
c) prepares a strategy to establish mutual benefits.

They would be able to develop business cases and leverage more benefits for themselves from future partnerships.

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"Sephora brings a fresh demographic to Kohl’s. Hopefully future partnerships with be just as strategic. "

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