Remember Lord & Taylor? The once-popular department store and higher-end mall mainstay met its demise in the wake of the pandemic. And it's not the only department store that fans have had to say goodbye to through the years.
What it is about department stores that's made them so vulnerable to closing? For one thing, there's now a world of competition from big-box stores, many of which have ramped up their inventory and expanded their product lines to better match the quality department stores are known for.
Also, e-commerce remains a huge threat to physical retail. While many department stores have tried stepping up their own e-commerce games, many can't match the speedy, efficient shipping of online giants like Amazon.
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Let's also not forget that department stores can be expensive to operate due to their sheer size. Granted, many department stores are able to enter into competitive leasing agreements at malls. But it's also common to have multiple department stores taking up residence in a single mall, lending to more unwanted competition and fewer sales.
Kohl's (KSS 1.49%), meanwhile has increasingly become a favorite among department-store shoppers. But it's actually trying to move away from that model -- and rebrand itself as a different type of shopping destination.
A new approach for Kohl's
At a time when so many retailers are struggling, Kohl's is doing reasonably well, at least from a stock-price perspective. Over the past year, shares of the company are up over 8%.
At the same time, Kohl's has lost 17% of its market share since 2011, mostly due to lower-cost competitors like Target and Walmart and online superstores like Amazon. Now, it's overhauling its brand in an effort to move away from the traditional department-store model.
Rather than maintain its current wide array of inventory, Kohl's is hoping to transition to more of a lifestyle brand in an effort to attract younger consumers, in particular. And its ongoing rollout of Sephora in-store shops could definitely help in that regard.
But that's not all Kohl's is doing. It also plans to shrink its traditional store format to expand into smaller markets. In fact, Kohl's has plans to open 100 new locations over the next four years.
Will this strategy work?
In recent years, Kohl's has managed to disappoint investors despite reasonable sales numbers. And the chain has already received a number of preliminary buyout offers in the hope of fueling enough growth to mimic that of its competitors.
Investors should take some comfort in the fact that Kohl's is doing its best to evolve in an age when e-commerce continues to dominate. Real estate investors, meanwhile, should be happy with the retailer's expansion plans. Retail real estate investment trusts (REITs) are in a precarious position these days due to the record number of store closures that ensued following the pandemic.
If Kohl's manages to grow its physical footprint, it could be a boon to the shopping centers that are no doubt vying for a strong anchor tenant.