Kohl’s brand mix
Kohl’s Corporation (KSS) sells private brands, exclusive brands, and national brands. The company’s private brands include popular established brands such as Apt. 9, Croft & Barrow, Jumping Beans, SO, and Sonoma Life + Style.
By contrast, exclusive brands are developed and marketed through agreements with nationally recognized brands. The exclusive brands sold by Kohl’s include Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic, and Simply Vera Vera Wang. The company’s national brands, meanwhile, include brands like Nike (NKE) and Levi Strauss & Company
Focus on national brands
One of the initiatives under Kohl’s “Greatness Agenda” strategy is to bring in more exciting national brands. In fiscal 2014, Kohl’s derived 50% of its net sales from the sale of national brands, up from 48% in fiscal 2013. During fiscal 2014, the company added over 15 new brands such as IZOD, Juicy, Fitbit (FIT), Nespresso, and Gaiam. According to the company, national brands drive customer traffic and higher sales. National brands are generally sold at higher prices than private and exclusive brands.
In the company’s 3Q15 conference call, Kevin Mansell, Kohl’s Chair, President, and Chief Executive Officer, stated that its national brand penetration increased by approximately 260 basis points to 52% in 3Q15 and to 50% in the first nine months of fiscal 2015. The company saw strong performance from brands like Nike, Levi Strauss and Carter’s (CRI) in 3Q15. Kohl’s and Nike together account for 0.5% of the holdings of the SPDR S&P 500 ETF (SPY).
What Kohl’s rivals are doing
Meanwhile, rival J. C. Penney Company (JCP) has been focusing on restoring its private brands as part of its turnaround strategy. According to J. C. Penney, its private brands like Worthington, St. John’s Bay, The Original Arizona Jean Company, and Ambrielle, generate higher profit margins than the national brands sold at its stores.
Other department stores that have their own private brands include Macy’s (M) and Nordstrom (JWN). Macy’s has an extensive collection of private brands including Alfani, Epic Threads, Hudson Park, Maison Jules, and Thalia Sodi. Some of Nordstrom’s private brands are 1901, Caslon, Zella, and Halogen.
Aside from national brands, Kohl’s has been also focusing on its beauty business. Continue to the next part of this series for the discussion.