The rise and fall of Kohl's, the Midwestern department store that took over the nation with discounts and celebrity partnerships
Kohl's was started in Brookfield, Wisconsin, by Maxwell Kohl in 1962.
Kohl was a Polish immigrant who had worked in factories in the US for several years before starting his first company, a small grocery store, at just 26 years old in 1927. The store included "modern-style supermarket" fixtures, like a bakery and deli. Kohl later went on to open 48 supermarkets in Wisconsin before selling the chain in 1970.
Later, he was inspired to transition from the grocery industry to the department store business after experiencing difficulty buying a shirt.
Kohl modeled his department store after his grocery store chain, with a particular focus on customer service and finding efficiencies to help lower prices for shoppers.
Source: The Immigrant Learning Center
Kohl's grew in popularity as an alternative to high-end department stores, offering high-quality goods for less.
Source: The Immigrant Learning Center
Kohl opened more stores, and together with his sons ran the business for the next decade before selling the chain in 1972 to the retail division of the British American Tobacco Company.
Kohl's sons retained leadership roles at the company even as it changed ownership in subsequent years.
In 1986, former store manager William Kellogg became CEO of Kohl's after taking over the company with his partners John Herma and Jay Baker as part of a buyout.
Source: Forbes
Over the next several years, Kohl's expanded throughout the Midwest, including into major cities like Chicago and Detroit.
In 1989, Kohl's acquired MainStreet department stores in Chicago and converted the stores into Kohl's locations.
After three decades of operation, Kohl's officially filed for its initial public offering in 1992.
By the turn of the century, Kohl's had 298 total stores in 25 states and 43,000 employees.
Kohl's spent the early 2000s focused on growth, expanding out to the coasts and opening stores in new regions like the Northeast.
In 2006, Kohl's sold off its credit card business to J.P. Morgan Chase for $1.5 billion and funneled the money back into opening more stores.
Source: The New York Times
That same year, Kohl's began to invest heavily in sustainability efforts at its stores, including installing solar panels on store roofs.
By 2006, Kohl's started aggressively bringing on big name designers and celebrity partners, starting with launching an exclusive collection with famous wedding dress designer Vera Wang.
Also in 2006, Kohl's brought on the cast of "Laguna Beach" for several meet-and-greet and promotional events.
Kohl's continued to enhance its profile with the help of television stars, including "Gossip Girl" actress Leighton Meester, who attended the launch of Flirt! cosmetics at Kohl's in 2008.
Kohl's also teamed with singers like Avril Lavigne, who launched her Abbey Dawn collection with Kohl's in 2008.
Reality star Lauren Conrad was also a notable celebrity partner, later launching her clothing line Paper Crown exclusively at Kohl's.
In 2010, Jennifer Lopez and then-husband Marc Anthony announced two lifestyle brands that were sold exclusively at Kohl's.
Kohl's continued to turn to celebrities as it worked to build out its private-label brands like Candie's.
Despite these efforts, Kohl's performance was still relatively lackluster. As a result, Kohl's then-CEO Kevin Mansell announced a turnaround program called "The Greatness Agenda" in 2015, setting in motion several new partnerships and initiatives.
"The Greatness Agenda is our multi-year plan and it's working. Since announcing this strategy one year ago, we've changed the trajectory of our performance trend line from negative to positive," Mansell said in a statement at the time.
As part of The Greatness Agenda, Kohl's began increasing its in-store tech services and installed buy-online-pick-up-in-store lockers in 2015.
Source: Business Insider
Looking to capitalize on the growth of off-price store models like TJ Maxx and Nordstrom Rack, Kohl's experimented with one of its own called Off/Aisle, a one-off store it opened in Wisconsin in 2015.
In 2016, Kohl's teamed up with Under Armour in a notable partnership to allow the department store to sell the athletic apparel in stores.
"We shared our conviction and our strategy that we intend to be the destination for active and wellness for the family, and I guess they were inspired by that because we're launching," Kohl's then-chief merchandising officer Michelle Gass told Bloomberg at the time. "Active was one of those areas where we're already seeing strength with Nike and some others, and we said, 'Let's take it to the next level."
Kohl's first started to experience serious trouble in 2017, when shares fell by 19% in January after the retailer warned investors of poor holiday sales.
It was the worst day on record for Kohl's stock. Macy's also dropped by 14% that day.
That same year, Kohl's began experimenting with a pilot partnership with Amazon that would allow shoppers to make returns from the e-commerce giant in select Kohl's stores.
The effort was rolled out nationwide in August 2019.
By 2019, Kohl's was starting to show significant signs of struggle, which experts say could be due to a failure to differentiate itself in the age of e-commerce.
"The playbook hasn't changed that drastically. Kohl's focused on getting good merchandising, working with companies like Amazon, and rightsizing stores," Sucharita Kodali, vice president and principal analyst at Forrester, told Business Insider. "They're doing everything to check the boxes, so what you're left with are the dynamics of the industry."
In June 2019, Kohl's announced it would be closing its four off-price Off/Aisle stores in Wisconsin and New Jersey after four years.
"While we've learned a lot from the tests, we also learned that our strength and ongoing improvements in inventory management across the company do not allow us to appropriately stock Off/Aisle stores at scale," Kohl's executive vice president Jon Gross wrote in a memo, according to USA Today.
In November 2019, Kohl's reported meager sales growth that missed Wall Street expectations.
In the third quarter of 2019, sales grew by 0.4% while profits dropped 24% in the same period in 2018.
Looking to the future, experts say Kohl's will need to make some major changes to stay afloat as the modern department store rapidly evolves.
"The brand still has some allure compared to other department stores," Jonathan Treiber, CEO of offer-management platform RevTrax, told Business Insider. "However, they need to focus on their offerings and what niche they can truly 'own' and carve out as a defensible strategy."
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