Kohl Corporation is a reputed player in the lifestyle industry. The company has weathered a fair share of storms, with the global economic crisis in 2008 hitting it the hardest. However, the company has maintained strong performance in the aftermath of the crisis, setting good records on growth. In the last three years, however, revenues have grown at a slower pace than expected, mainly due to ineffective marketing strategies.

The paper examines the situation for Kohl, citing the need for solutions towards a very profitable future. First, the Y generation, commonly called the millennials, is tech-savvy, preferring to do shopping online as opposed to stores. That raises the need for Kohl to construct solutions on this level to take advantage of the economic growth, increase consumption and trendy lifestyles of the millennials. In so doing, the company will be providing a modern solution to modern needs.

The management should consider having a very aggressive online marketing strategy as opposed to opening more stores across the country and Alaska. This is because the modern consumer spends more time on the internet than anywhere else. The paper suggests a step-program that will ensure that proper planning and implementation for a successful growth future. The plan will also cut on costs because it bypasses the normal distribution chain that is usually resources intensive.

KOHL’S CORPORATIONS

Situation Analysis

Introduction

Kohl’s Corporation (NYSE: KSS) is an American based department store chain headquartered in Milwaukee suburb of Menomonee Falls, Wisconsin. The company entered in S&P 500 list in the year 1998 and in 2010, it also got a place in Fortune 500. The company has 1,158 well-established stores and is located in 49 states, more than J C Penny, the main competitor (Kohl, 2014)

1. Internal Performance

COMPANY’S STATERGY, MISSION, VISION, VALUES AND STAKEHODLERS

Mission: To create a niche market for the products to enhance the customers shopping experience at their departmental store

Vision: To become the largest departmental store in the world and establish itself as a global player

Strategy: Increasing the per store transactions. (Farfan, 2014)

COMPANY’S FINANCIALS

The analysis of the income statement reveals that there has been a drop in net sales, gross margin and net income of the company in the last 3 years. (Annual Report, 2013). The company has struggled to grow sales, margins and profits, possibly due to competition or decreased demand for the goods and services.

Debt Levels

The long-term debt levels of the company as at 2nd Feb2013 was $2,492million and was $2,792million as at February 1st 2014.

Historical stock prices

The stocks of the company are traded on NYSE since the year May 19, 1992. The following graph was created and exported from the Morning Star site, showing price movements in the last 8 years. The graph shows the company through the recession to the recovery in 2014.

Industry Perspective

The company operates in Life Style and retail sector. The general macroeconomic performance like recession or a boom usually affects this industry, since volumes of disposable income have a perfect linear correlation with sales.

Competitors

· J C Penney Corporation Inc (Privately held)

· Target Corporation

· The TJX Companies, Inc

The company faces tough competition from of the three companies. (Yahoo Finance, 2014). Additional figures from Market Watch.

	Kohl's Coproration	JC Penney	Target Corp	The TJX	Industry
Market Cap:	11.57B	2.36B	37.43B	41.85B	5.20B
Employees:	31,000	1,160,001	366,000	191,000	18.70K
Qtrly Rev Growth (yoy):	-0.01	-0.02	0.02	0.07	0
Revenue (ttm):	18.86B	12.98B1	73.23B	28.20B	3.78B
Gross Margin (ttm):	0.37	0.24	0.29	0.28	0.33
EBITDA (ttm):	2.59B	(739)m	5.69B	4.01B	221.33M
Operating Margin (ttm):	0.09	-384	0.05	0.12	0.05
Net Income (ttm):	868.00M	-986M	1.51B	2.18B	N/A
EPS (ttm):	4.1	-4.49	2.37	3.04	0.13
P/E (ttm):	13.78	N/A	24.95	19.9	19.5
PEG (5 yr expected):	2.3	N/A	1.55	1.68	1.03
P/S (ttm):	0.61	N/A	0.51	1.47	1.47

SWOT Analysis

Strengths	Weakness	Opportunities	Threats
High revenue and strong financial position	There is a constant change in the market share due to the change in preference of the consumers.	Increase in disposable income with boost the sectors performance as well as the performance of the company.	The increase in prices of raw materials leads to decrease in profitability.
Kohl's stores feature nationally recognized brand-name merchandise, exclusive labels, and private-branded goods		It has the opportunity to expand in foreign markets and tap the customers from there.	Requires huge capital for rapid expansion of the company.

(KOHLS, 2014)

The SWOT analysis helps in understanding the core areas where the company can improve its performance. It also helps in identifying the factors, which can have a negative impact on the performance of the company. As the factors can be identified, the company can take steps to correct the variances that arise and thus improve the profitability of the company.

Environmental factors (SWOT Analysis)

There are several external factors, which has an impact on the performance of the company. The new regulations by the government if in favour of the industry help to boost the performance of the industry. As the company is the leader in the industry, any favourable change by the government in terms of policies and regulations will help the company’s performance to increase.

The prices of the raw materials affect the performance of the company. Where there is an increase in the prices of the raw materials, the cost of goods sold by the company increase and there is a reduction in the operating profit of the company. However, dynamics in the technology over the last few years in the industry has helped the company to improve its cost efficiency and control its cost better.

Problem Analysis & Description

From the analysis below, the firm has been struggling to increase sales in the last three years. For example, sales went down by 238M between 2013 and 2014. The same time, COGS (costs of goods sold) increases from 61.82% of the total sales to 63.74% then 63.51% in 2014, showing the pressure on production. While costs have increased, the major slow down for Kohl is the negative growth in sales.

Profitability Ratios
Margins % of Sales	2012-01	2013-01	2014-01
Revenue in USD (Mil)	18,804	19,279	19,031
Revenue (pegged at 100% for analysis)	100	100	100
COGS	61.82	63.74	63.51
Gross Margin	38.18	36.26	36.49
SG&A	22.56	22.13	22.66
R&D
Other	4.14	4.32	4.67
Operating Margin	11.48	9.8	9.15
Net Int Inc & Other	-1.59	-1.71	-1.78
EBT Margin	9.89	8.1	7.38

The drop in Kohl’s corporation’s sales is what has affected the income level of the corporation. The drop indicates that there is a problem may be with the marketing department. May be a good market analysis was not done properly and therefore the goods and services of the corporation could not sell well in the market. In addition, the drop in sales of the Kohl’s corporation could be as a result of introduction of a new commodity which was not marketed well before been introduced into the market.

The increase of SG&A is an indication of stalled plans to increase sales. When a company decides to increase the resources used in the running of the business, there is usually an expectation to grow profits to compensate for that investment. In this regard, therefore, the decision to increase the executive compensation by 73.37% in 2013 has not bore any fruits, posing a question to the effectiveness of the strategies developed by the management. Though the company has EBTIDA to sales margin above the industry average, it raises efficiency questions to how the marketing department is achieving goals to grow sales year to year.

On the other hand, the general economy has come out of the wilderness, so much so, that the Federal announced a halt to the tapering program. The growth, at least on face value, should lead to availability of more disposable income and growth in sales. The fact that the revenue growth by Kohl has not grown in tandem with the overall macroeconomic outlook is a worrying factor that can derail investors or raise questions on the ability of the management.

In nutshell, Kohl Corp has failed to stay ahead of competitors, losing clients to competitors like the TJX. The customers are usually influenced by cheaper prices, timely fashion deliveries to the stores, ineffective marketing and technology adoption. Solutions to the factors above will be key for the for the future sales growth for the company.

Article

The peer –reviewed article I have found is entitled Walmart’s Struggles in India: How Institutional Contexts Can Limit Foreign Entry. This article provides information on the case of the Walmart Corporation in India whose entry into the foreign market has been limited by contexts that are more institutional than ideological. This limit has forced the corporation to remain within the regional and national scope. The relevant page from the Ulrich’s website for this article is volume XIII issue I Fall 2012. Globalization trends have heavily affected the social relations of corporations. The article clearly shows that there are components that shape the development of corporations internationally (Mallika, 23-47).

Solution, Evaluation & Recommendation

The company can evaluate several solutions to increase sales by attracting more customers, retaining seasoned customers as well as liability of their stores regarding fashion changes and preference. The solutions are: strengthening the E-commerce segment, scrapping away the purchasing agents as well as seeking better marketing strategies.

E-Commerce

The modern business environment is fuelled by technology and the ability to stay ahead to meet consumer needs. The Y generation has been touted as tech-savvy, nonconventional and selective. That means that for a company that sells lifestyle products, a good online marketing plan can save on many costs. For example, Kohl Corp plans to open five stores in 2014 fiscal year, adding the stores to a total of 1163 across the United States and Alaska.

The adoption of a more rigorous E-commerce strategy will reduce costs incurred in stores management, improvements as well as rent and leasing. E-Commerce maintains low inventory levels hence the costs on inventory will be low since customers will be supplied on request. In the year 2013, for example, store costs increased by 27M dollars, the same as distribution costs. The company also plans to open new stores at a cost of 43.5M and remodelling/relocations of stores at a cost of 94M in the year 2014.

If we assume a constant growth of store expenses, with the same amount of 27M incurred in the previous year, then add up the costs expected to be incurred in the opening of new stores and remodelling/relocations, then the total incremental expenditure will be 160M dollars. E-Commerce targets the millennial/Y generation, which makes 27% of the total population and 21% of the total expenditure. The motivation will be to introduce a new way of doing things for the young population, (Barrons Magazine, 2013)

Considering the national data averages, this segment of the population will contribute to 21% of the sales at a lower cost. Taking the figure, total revenues, as 19,031M, 21% will amount to 3,996M. On line sales reduce storage costs because distributions are done through the distribution centers as opposed to the chain stores. The solution cuts on stores expenses while increasing distribution costs. By the end of the year, the 27M budgeted expenditure on new stores can be diverted to distribution. The assumption is that the whole amount will be used to generate sales with a target of 3,996M online sales per year, as opposed to 284M in the previous year.

Drawing a pro forma income statement for 2014,

Total Sales	19,982.55
E-Commerce sales	4,196.34
Stores sales	15,786.21
Costs of goods sold	(13,295.70)
SG&A
Store sales (22% of sales)	(3,472.97)
E-Commerce sales(12%)	(503.56)
Depreciation & Amortization (5% of sales)	(889.00)

Operating income	1,821.32

The above statement assumes that sales will; grow by 5%. That 21% of the sales will be through E-Commerce. The sales through E-Commerce have a better margin since the SG&A cost attached to the sales is 12% as compared to 22% through the stores. This is because one doesn’t need to pay rent and incur maintenance costs for the stores.

The net benefit from concentration on E-commerce will be savings on opening new stores, long-term cost savings on rent and renovations as well as less expenditure on salaries and administration costs. The long-term outlook may even involve closure of some stores. In that regard, Kohl will not only have grown sales but also solved the problem of timely delivery of goods from suppliers.

Scrapping out Third Party agents

From the annual statements, 2013, the management notes that; “We may be unable to source merchandise in a timely and cost-effective manner. Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. The remaining merchandise is sourced from a wide variety of domestic and international vendors. Our ability to find qualified vendors and access products in a timely and efficient manner is a significant challenge, which is typically even more difficult with respect to goods sourced outside the United States. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, and the ability to access suitable merchandise on acceptable terms are beyond our control and could adversely impact our performance”, (Kohl Corporation, Annual report, 2013).

Lifestyle industry is usually ruled by the ability to avail products to clients when mostly needed. For example, the success of Zara, the Spanish cloth company, is pegged on the ability to deliver new goods and fashions fast and efficient. The nature of the industry requires response to demand, efficiently. If Kohl can free up its international supply by doing away with the agents, then they can be assured of very swift and efficient supplies hinged on demand, ("Zara's Secret To Success: The New Science Of Retailing").

The upshot will be increased sales, improved image on trendy products as well as an evened customer traffic throughout the year. The backdrop of this inference is the fact that the ability to deliver fashionable goods and products on time motivates clients to drop by the stores or the website to check out “what is new”. In so doing, they may discover products from the local production market that is interesting.

Getting the amount spent on agents is hard. However, if the company can spend the same amount, or even slightly more, to achieve efficiency and regularity in supplies, then it will be worth the course to scrap third party agents.

Better Marketing Strategies

The management has noted the ineffectiveness of new marketing strategies despite the allocation of more resources in the budget. In the annual statement, 2013, the management notes that, “Marketing costs were higher in 2013 as we increased our spending in digital and broadcast and added additional markets to our loyalty program pilot”, (Annual report, 2013).

The marketing department should put in place more aggressive methods to achieve increased sales. For example, the company can have more promotions to increase customer traffic and recover confidence in their products. In as much as this effect cannot be measured, it gives the company a lifeline to increase performance to the industry standards, considering that performance has lagged behind the S&P index as well as the industry averages, (Annual report, Pg 14)

Recommendation

From the above discussion, the option of E-Commerce provides the best opportunity for Kohl to grow and meet market needs. First, the option offers a new dimension to keep up with changing population trends, technology dynamics as well as a positive outlook based on modern consumption trends. As compared to opening of new stores, E-commerce offers the kind of opportunity that enables the company to understand the needs of the growing population, commonly compared with the baby-boomers who changed the landscape of consumption in the 60’s and 70’s.

Implementation

The recommended solution is the previous section can be implemented in the following steps;

1. Management decision; the first step should be a board meeting on the need to adopt aggressive E-commerce strategies. The idea will be to get all members of the team understand the need for a faster growth and understanding of the modern consumer. Also, the management team needs to understand the general economic outlook, especially in regards to the future consumption trends. The proactive move will foresee a less need for physical space as people plan to spend less and less time on shopping.

2. Drawing up a strategy and budget: The marketing team would be tasked with coming up with a proactive strategy to carry out the decision. An interdepartmental review should be done before the strategy is rolled out, with the purpose of ascertaining the feasibility of the plan. The strategy should come with a budget, a keen need to establish cost estimates in the implementation of the strategy.

3. Drawing an action plan: the action plan will be pegged on deliverables in the strategy and budget.

4. Assigning a team to the project: The team will be led by a project leader who will be responsible for the day to day management of online sales.

5. Holding monthly review meetings with the marketing leader and quarterly meetings with the executive management to review progress.

Success Metrics

The success of the implementation will measured by the use of several indicators and deliverables. The first indicator will be the number of people visiting the site per month. The website traffic will be compared to actual sales. In the first quarter after the implementation, the key objective will be to get more customer awareness on the E-commerce segment of the business.

The other deliverable will be volume of sales through the channel. To ensure that the project is well fast-tracked, accounting for online sales will be done separately. The definition of an online sale will be any sale that was transacted online and delivered to the client premises or office. To separate it from the stores sales, deliveries will be done from distribution centers.

BIBLOGRAPHY

Bibliography

(2013). Annual Report.

Farfan, B. (2014, October Thursday). Company Mission Statements - Complete List of World’s Largest Retail Missions. Retrieved October Thursday, 2014, from Company Mission Statements - Complete List of World’s Largest Retail Missions: http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Kohl-s-Stores-Mission-Statement.htm

KOHLS. (2014, October Thursday). Retrieved October Thursday, 2014, from KOHLS: http://www.mbaskool.com/brandguide/lifestyle-and-retail/4932-kohls.html

Kohl's Corporation. (2014, October Thursday). Retrieved October Thursday, 2014, from Kohl's Corporation: http://www.kohlscorporation.com/AboutKohls/AboutKohls01.htm

Yahoo Finance. (2014, October Thursday). Retrieved October Thursday, 2014, from Yahoo Finance: https://finance.yahoo.com/q/co?s=KSS+Competitors