Kohl's To Open 100 Small Format Stores

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Alpha8472
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Kohl's To Open 100 Small Format Stores

Post by Alpha8472 »

Kohl's will open 100 small format stores around 35,000 square feet compared to 80,000 square feet for most existing stores. The company will also test Sephora stores in these small format stores.

Many Kohl's near me in the San Francisco Bay Area were Montgomery Ward stores or other department stores. Around 2005 Kohl's spared no expense opening up stores in California in totally remodeled buildings. They looked like totally brand new stores.

Now these huge Kohl's stores seem so empty. They could downsize the old ones. Why open up 100 new stores? Unless Kohl's decides to become another Ross or Marshall's, I do not see how these little stores will do anything for them.
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Re: Kohl's To Open 100 Small Format Stores

Post by Andrew T. »

Kohl's Hometown! I can just imagine it now. Maybe they can even find some Alco and Pamida buildings to fill up. What could possibly go wrong? /s
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Re: Kohl's To Open 100 Small Format Stores

Post by mjhale »

I wonder if Kohls is trying to get out of some of the huge stores that you describe. There is plenty of vacant strip mall retail space that Kohls could open these small size stores. The Kohls stores near me are huge two story buildings that are designed like mini versions of mall department stores. If Kohls cut out all of the stuff that doesn't sell they could get these stores down more towards 40-50,000 sq feet. Why keep the huge buildings when you can go into strip mall spaces and have a more focused store that actually sells some product.
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Re: Kohl's To Open 100 Small Format Stores

Post by storewanderer »

This is nothing new. There is a Kohl's in Elko, NV that is in part of a former Kmart and it is about this size. It has been open for about 2 years (opening was delayed due to COVID business restrictions).

Kohl's offering has become so poor they may as well downsize the stores significantly.

Maybe Kohl's can work a deal with Sears to get old "Hometown" signs. Also they can go pull signs off the old Shopko "Hometown" Stores that still have signs up.

Small towns typically see right through pandering like this. The big city marketing folks think calling a national chain store located in a small town "Hometown" gives the folks in small towns the warm and fuzzies but the reality is they see right through it.
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Re: Kohl's To Open 100 Small Format Stores

Post by ClownLoach »

They probably realized what I said months ago - that it is not easy to just cut a store in half and sublease the rest... It costs just as much, if not more, than building a new store from scratch and introduces liability on Kohl's to be a landlord for someone else unless they can somehow get out from under their lease obligation on the entire box and hand the new suite back to the landlord. Maybe there will be some landlords that are desperate to keep Kohl's and would be willing to sign a complete new "day one" lease locking them into their new downsized space for another 20 years in exchange for the pad opened up for a new tenant? But I cannot imagine that any landlord would be willing to pay the costs on this just to keep Kohl's either. Not to mention lease exclusion clauses by other tenants in the center restricting similar types of business, like the numerous Albertsons leases where they set ironclad and transferable grocery exclusives which resulted in the Target in the same center not being able to ever add the fill P-fresh setup.

I've been through this situation where I helped select a site for my company and we didn't need the entire space. Our lease had us paying all tenant improvement costs and it was actually more profitable to just mothball the extra space versus the costs of properly dividing the site, separating HVAC and fire sprinklers, firewalls, and constructing facilities such as adding plumbing on that side for restrooms, reconfiguring receiving area to add a dock and corridor etc. Plus our store would have required another 6 months of construction before we opened. It was actually more profitable to mothball that empty space and drywall it out of use than build it out and collect market rent. This is apparently typical and some retailers are willing now to lease more space than they need and just wall off what doesn't fit in the prototype because it is still the most profitable way to get the site they want.

But this 35K store, if it actually works for Kohl's, is not exactly a great answer either - now Kohl's is looking at a future where they save themselves by replacing the entire store fleet. And that is a long, expensive endeavor that no major retailer with such extensive real estate problems has ever successfully accomplished (see Sears/Kmart "transformation" strategy, Circuit City rebranding to The City, and other retailers like BB&B, Michaels, Joann, Office Depot/Max that have spoken to Wall Street about snowflake store problems where no two stores are the same format). The sad reality is they've already made their bed and have to lie in it. The existing leases all become liabilities if the company decides that they are completely changing their operating model. It would be substantially cheaper to be a completely new company leasing new stores around 35K Sq Ft for their new retail concept versus Kohl's having to unwind the entire fleet of 80K plus boxes. They're still better off dead than alive from a financial perspective - the only affordable way to unload that fleet is in a Bankruptcy courtroom.

Now having said that - has anyone noticed how quickly Burlington is moving through their downsizing? The difference is that most big Burlington stores are really low rent problem buildings where they probably had short term leases already, and they're downsizing to closed Toys R Us or original large format PetSmart size boxes no other retailers want at 40K or more. Seems they've got a relationship set up with Floor and Decor to take the standalone locations, many of which seem to be old Kmart locations. Kohl's liked to be set up as a prominent anchor and as such they probably got long term rent stability through 30 or more year leases, but now they don't need the space and it's a liability.

But if Kohl's is ever looking for a new CEO give me a call. Step one, negotiate Golden Parachute contract that I can retire off, yacht included. Step two, I call the bankruptcy court and shut it down.
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Re: Kohl's To Open 100 Small Format Stores

Post by storewanderer »

ClownLoach wrote: May 30th, 2022, 8:36 am They probably realized what I said months ago - that it is not easy to just cut a store in half and sublease the rest... It costs just as much, if not more, than building a new store from scratch and introduces liability on Kohl's to be a landlord for someone else unless they can somehow get out from under their lease obligation on the entire box and hand the new suite back to the landlord.

But this 35K store, if it actually works for Kohl's, is not exactly a great answer either - now Kohl's is looking at a future where they save themselves by replacing the entire store fleet. They're still better off dead than alive from a financial perspective - the only affordable way to unload that fleet is in a Bankruptcy courtroom.
Especially some of the older 90's Kohl's Stores. Those things were built better than average and splitting won't be so easy.

The 35k store won't work, this is all talk of a management team that can't seem to get it together and has one bad idea after another. Their CEO pushing athletileisure or whatever if was is off target when you look at the financial results of Macy's and Nordstrom recently, there is some pent up demand for "nicer" clothing (I don't expect the demand to continue, but I am sure the lousy mix at Kohl's pushed some customers to Macy's and Nordstrom for nicer stuff).

Also moving into smaller markets is going to be a failure. JC Penney has already closed many small market stores (still has some left though) and that old Stage/Bealls/whatever chain was focused on small markets with 20k square foot stores with a Kohls-like mix and struggled financially for decades.
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Re: Kohl's To Open 100 Small Format Stores

Post by pseudo3d »

storewanderer wrote: May 30th, 2022, 11:29 am
ClownLoach wrote: May 30th, 2022, 8:36 am They probably realized what I said months ago - that it is not easy to just cut a store in half and sublease the rest... It costs just as much, if not more, than building a new store from scratch and introduces liability on Kohl's to be a landlord for someone else unless they can somehow get out from under their lease obligation on the entire box and hand the new suite back to the landlord.

But this 35K store, if it actually works for Kohl's, is not exactly a great answer either - now Kohl's is looking at a future where they save themselves by replacing the entire store fleet. They're still better off dead than alive from a financial perspective - the only affordable way to unload that fleet is in a Bankruptcy courtroom.
Especially some of the older 90's Kohl's Stores. Those things were built better than average and splitting won't be so easy.

The 35k store won't work, this is all talk of a management team that can't seem to get it together and has one bad idea after another. Their CEO pushing athletileisure or whatever if was is off target when you look at the financial results of Macy's and Nordstrom recently, there is some pent up demand for "nicer" clothing (I don't expect the demand to continue, but I am sure the lousy mix at Kohl's pushed some customers to Macy's and Nordstrom for nicer stuff).

Also moving into smaller markets is going to be a failure. JC Penney has already closed many small market stores (still has some left though) and that old Stage/Bealls/whatever chain was focused on small markets with 20k square foot stores with a Kohls-like mix and struggled financially for decades.
I forgot the exact set-up but Stage Stores was when investors slammed together Palais Royal and Beall Bros. into a new retailing company, and even that company wasn't all that well forward-facing. Palais Royal (which ended up being their Houston-only brand) and Bealls had a few new strip center stores but a lot of their stores were in dowdy, declining malls and small towns.
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Re: Kohl's To Open 100 Small Format Stores

Post by Jeff »

Kohls Montebello opened a few years ago in a former 99cent store (which itself was a former Circuit City and prior to that a part of a large 82k sq ft Zodys store that closed around 1986). Its a mere 30k sq ft big making it a SMALL Kohls.
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Re: Kohl's To Open 100 Small Format Stores

Post by storewanderer »

pseudo3d wrote: May 30th, 2022, 1:32 pm

I forgot the exact set-up but Stage Stores was when investors slammed together Palais Royal and Beall Bros. into a new retailing company, and even that company wasn't all that well forward-facing. Palais Royal (which ended up being their Houston-only brand) and Bealls had a few new strip center stores but a lot of their stores were in dowdy, declining malls and small towns.
Stage Stores did business in Nevada back in the 90's and went bankrupt and closed all of its stores in the state. These same stores (in one case I think it was even in the same location) reappeared as Bealls in the mid 2000's. Same strategy- "brand name styles for small communities." Then they converted everything to Gordmans but went bankrupt and closed the entire operation in the middle of that project so not all stores actually converted.

Looking at how they did things pre-Gordmans, as there was a Bealls I went into quite frequently and purchased many things from, including some from their website, they really ran like a smaller version of Kohl's. Same sales on top of sales, same extreme high low pricing, same coupon program with various "exclusions," same large skew toward private label products but as far as brands go they largely had the same brands as Kohl's. A couple of their locations in this area also had upper end cosmetics brands (Clinique/Estee Lauder) in Carson City, NV and Fallon, NV.

If Kohls really wanted to get into the small town model they could have bought parts of Stage out of bankruptcy and reopened the stores. There was a chunk of Stage that was profitable that Kohl's could have easily cherry picked.
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Re: Kohl's To Open 100 Small Format Stores

Post by Mgomrjsurf »

https://www.bizjournals.com/milwaukee/n ... _medium=en &utm_campaign=EC&utm_content=ml&ana=e_ml_EC&j=27884420&senddate=2022-05-30 might effect this.
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