Kohl’s Corp. wants to score higher grades on its 2023 back-to-school season, which kicks off this week with several tactical changes and poses a crucial test for the retailer’s new management team.
Executives told WWD the store is offering more ways for customers to save money, and that it has simplified its value messaging so shoppers can readily understand the deals being offered. The marketing is also emphasizing versatility, meaning how key back-to-school fashion items can be outfitted in different ways and worn for different occasions.
Among the values being promoted: kids’ T-shirts priced under $10 and denim for juniors, teens and tweens priced $29.99. Along with these “must-have” deals for b-t-s, trends that are being played up include retro and Y2K fashions, utility cargo bottoms, nostalgic graphic T-shirts and platform shoes, according to Kohl’s executives.
It’s clear that Kohl’s is seeking to transcend what retailers industrywide have done — confused shoppers with couponing, point-of-sale markdowns, doorbusters, points and store card deals so it’s difficult to tell what the out-the-door price of a product is and its real value.
Kohl’s’ back-to-school season kicks off Tuesday. So does Amazon Prime Day, which is a two-day affair, and a lot of other price promotions at retailers like Walmart and Target in response. Back-to-school starts to peak late in July and continues through August as students return to school at different days around the country. Typically, by mid-September b-t-s tapers off.
Historically at Kohl’s, b-t-s revenues have represented a bigger percent of the overall annual volume, compared to competitors. That’s by virtue of Kohl’s being consistently among the most promotional of retailers offering strong values, and maintaining a one-stop-shop family appeal. Precisely how much b-t-s represents of Kohl’s total volume is something it and other retailers generally don’t break out.
“Back-to-school is a really important part of our proposition as a family-oriented retailer that offers a mix of private brands and market brands, great values, and with convenient locations,” said Nick Jones, Kohl’s chief merchandising and digital officer, who acknowledged that b-t-s is relatively more significant to Kohl’s compared to rival retailers. Kohl’s competes most directly against JCPenney, Macy’s, Target, Walmart and Amazon, as well as off-pricers like T.J. Maxx.
“We know consumers are feeling pressures,” said Christie Raymond, Kohl’s chief marketing officer. “We are leaning heavily into value, and simplifying our value proposition by sharpening our focus on clarity and leaning into great products, ‘cost per wear’ and versatility. There are a number of different items and ways we will show this.”
As Jones said, “With T-shirts and cargoes, we can dress them up and down so there are different outfits.” Displaying different outfits and ways to wear the clothes “is really being amplified this year.”
Asked what products and categories are considered must-haves or nondiscretionary within the back-to-school context, Jones replied: “T-shirts, denim, backpacks, sneakers, dresses and basics we would classify as everyday staples. Alongside that, we’ve got to make sure we have the right trend product, the right trending styles,” Jones said, citing cargoes and those Y2K fashion trends harkening back to the ’90s and 2000s.
With the back-to-school merchandising, “We bring a lot of the product together in all the key categories, to the front of the store so we have that one-stop-shop mentality,” said Jones. Additionally, b-t-s product is displayed in their respective category areas throughout the store, as well as being highlighted on Kohls.com.
Last year’s b-t-s season at the Menomonee Falls, Wisconsin-based Kohl’s was underwhelming. For the three months ended Oct. 29, 2022, net sales were down 7.2 percent to $4.28 billion, and there was a decline in gross margin to 37.3 percent from 39.9 percent.
This year, however, several factors work in the retailer’s favor. Analysts and research firms are forecasting b-t-s sales industrywide up over 3 percent or more, though gains would in part be attributed to higher prices even as the rate of inflation is decreasing this year. For example, Craig Johnson, president of the Customer Growth Partners research and consulting firm, said he expects sales to be up 3.7 percent.
“That’s OK, not great. People are much more considered in their purchases,” said Johnson.
KPMG in its 2023 BTS Spending Survey forecast on average $377 per child would be spent this year, ranging from $212 per preschooler to $640 for a first-year college student. Of those surveyed, 82 percent said they would be spending more than a year ago, primarily due to inflation.
Also working in Kohl’s favor are this year’s traffic trends at stores. They have been on the rise, and Kohl’s will get some additional visitors, particularly younger ones, due to the rollout of its in-store Sephora shops and drop-off points for Amazon returns. Convenience has long been a big part of Kohl’s campaigning. The company operates 1,100 stores which are often in strip centers, and closer to where people live than malls would be. For greater efficiency and to make space for “must-have” product, most stores are consolidating to one checkout area, and more than 250 self-checkout kiosks will be added to support the transition and make shopping more convenient.
Asked whether the new management team at Kohl’s expects to see sales gains for b-t-s this year, the executives interviewed by WWD said it was too early to say, though there would be some commentary on that later on. This year, Jones, formerly with the Joules Group, Asda/Walmart, and Marks & Spencer, was named chief merchandising and digital officer. Dave Alves, formerly with Bealls, TJX Canada, Hudson’s Bay and Sterling Shoes, was named president and chief operating officer. Tom Kingsbury, formerly Kohl’s interim CEO, CEO of Burlington Stores, and a longtime May Department Stores executive, was named permanent CEO. Raymond became chief marketing officer in August 2022, after working for several years at the Walt Disney Co.
Last quarter Kohl’s reported comparable sales down 4.3 percent, gross margin as a percentage of net sales at 39 percent and up 67 basis points from the year before, net income flat at $14 million and a 6 percent reduction in inventory. Kohl’s declined to comment on inventory levels for b-t-s.
Whether families will spend less on clothing and footwear as kids return to school, with the cost of pens, pencils, notebooks and laptops being higher, remains to be seen, though purchases of discretionary goods such as clothing and shoes have been declining all year, according to U.S. Commerce Department data.
Target recently lowered its full-year outlook, pointing to cautious consumers who are prioritizing essentials over discretionary purchases like clothing and electronics. Aware of the pressures on consumers, Doug McMillon, CEO of Walmart, said at the retailer’s annual meeting that this year more back-to-school merchandise, including notebooks, pencils and pens, would be rolled out at opening price points. Meanwhile off-price chains such as T.J. Maxx are likely to benefit during b-t-s from the increase in consumers seeking savings.
“As families across the country prepare to head back to school, we know value continues to be top of mind, and we’re making it easy for kids and parents alike to gear up for the year ahead with style-forward items at great prices,” said Raymond. “Shoppers can count on Kohl’s to stretch their budgets,” utilizing Kohl’s Cash, the Kohl’s Card and Kohl’s Rewards, she said.
Looking to get a jump start on b-t-s business, on Tuesday Kohl’s launches its “Summer Cyber Deals,” which executives characterize as one of Kohl’s biggest savings events of the season. On Tuesday and Wednesday, Kohls.com is offering up to 60 percent across select apparel, home, toys and other categories as well as buy one, get one for $1 (BOGO) deals at stores and online on select styles of T-shirts, tank tops, shorts, capris, swim and other items.
Customers who sign up for Kohl’s free rewards program immediately earn 5 percent Kohl’s Rewards on every purchase, and receive personalized deals and perks. Additionally, Kohl’s Rewards members paying with their Kohl’s card earn 7.5 percent Kohl’s Rewards. And Kohl’s offers at certain times and on certain products, $10 Kohl’s Cash for every $50 spent on top of any additional Kohl’s Rewards. Sephora is excluded in that.
Among the private brands Kohl’s will be touting during b-t-s are So, Jumping Beans, Little Co. by Lauren Conrad, and Sonoma Goods for Life. Executives also cited small appliances directed at college students, such as toasters priced under $20 from brands like Dash and Toastmaster.