If Kohl’s is So Bad How Come Everyone Wants It…Bad?

Let’s see, what is the current total of how many people say they want to buy Kohl’s? I don’t know about you, but I’ve lost track. The most amazing part is that this is a retailer that all these potential buyers say is a bad company, poorly run and in danger of collapse. And yet they all can’t wait to buy it.

What gives?

Kohl’s was one of the biggest success stories of late 20th century/early 21st century retailing in America. From a small base in the upper Midwest it expanded into a national chain, competing with and eventually besting any number of other retailers fighting it out in the moderate mid-market space, including the late lamented Mervyn’s but also JCPenney to some extent and even into Macy’s territory

What went wrong over the past few years? You really can’t point your finger at one specific thing, unlike other distressed retailers. Maybe it didn’t embrace e-commerce fast enough though it has a nice business online. Maybe some of the merchandise offerings got a little stale, especially in apparel as fast-fashion specialty chains took the lead in trend-worthy goods. And you can’t underestimate the challenges presented by being in a mid-market sector that has been slowly disappearing from the American consuming landscape for at least a decade or two.

Frankly – and I’ve said it before – Kohl’s is not a bad retailer. It could do things better and it’s trying to, but investors, critics and Wall Street in general seem to have lost faith. Hence, the feeding frenzy now going on to try to take over Kohl’s…and the circle-the-wagons defensive strategy current management is deploying to repel them.

Even as few of these suitors have expressed any real details on what they would do to make Kohl’s a better retailer (most of the takeover efforts revolve around making those taking over richer), there is much at Kohl’s that could be a solid foundation for any new owners.

A few very specific things come to mind:

• Off-the-mall: It’s the most obvious competitive attribute Kohl’s possesses versus mall-based competitors. With the vast majority of its locations in strip centers or freestanding on shopping thoroughfares, the stores offer the get-in/get-out footprint that many shoppers want today. The physical ability to offer curbside pick-up and even drive-through service is a real advantage. There’s no other general merchandise seller north of Walmart and Target that can provide this kind of shopping experience.

• Family First: Maybe this has gotten lost in translation the past few years but a foundation of the retailer almost since its inception by the Kohl family has been it merchandising focus on young families: mom, dad and the kids. Footwear has been a big part of that but also fashion basics like jeans, tops and underwear. With a millennial generation now deep into its family formation stage, this is a powerful tool that other retailers can’t necessarily match.

Sephora: It was one of the best things Michelle Gass and current management did when they snatched the beauty brand from JCPenney last year. Sephora brings in a customer Kohl’s isn’t necessarily getting and it offers enormous potential for adjacent sales, something Penney never seemed to be able to capitalize on. Target may have Ulta but Sephora is the blue-ribbon name here and it’s very valuable for the future of Kohl’s.

• Brand partnerships: I’m less sure of the value of some of Kohl’s tie-ins with brands like Amazon, Planet Fitness and Reese Witherspoon’s Draper James but they do offer a potential that has intriguing possibilities. With so many brands – read Nike – putting up paywalls with third-party distribution partners, Kohl’s has the basis to make things interesting.

• Deals: The retailer’s famous – infamous maybe? – promotional efforts for better or worse have created a reputation for bargains that can’t be taken for granted. Too many other retailers would kill to have this persona with shoppers. It’s an intangible but one that has to be counted as a huge plus for Kohl’s.

It’s a compelling mix of attributes that any new owner could inherit. The sad part is that most of them could care less and will probably ignore or even trash much of what is good at Kohl’s in the name of change. It’s what new owners and new management do.

Kohl’s annual meeting is May 11 and that could be the day big things happen. In the meantime current management is working overtime telling its story to shareholders, buying back shares and doubling the dividend. It probably won’t be enough to avoid a takeover, there’s just too many invaders out there.

Whichever one get Kohl’s, they would do well to build on the foundation Kohl’s has spent decades building up. All of these guys want the company bad…but let’s hope they do good once they get it.

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