Key takeaways from Kohl CEO's Bloomberg interview

Kohl's Corporation (NYSE: KSS) is emerging from the COVID-19 pandemic with a different look and the retailer is prepared to take advantage of a “big opportunity,” CEO Michelle Gass told Bloomberg in an interview.

Different and the same

Kohl’s is led by Gass, a former Starbucks marketing executive that implemented multiple initiatives over the years to separate itself from its rivals. The company found success in leveraging its large store space to add new benefits for consumers to walk through its doors, such as an Amazon return center in more than 1,000 stores.

Yet at the same time the company hasn’t lost its core identity, even during the pandemic that shook up the retail universe. She told Bloomberg:

Focus on beauty

Sephora will start opening up “shops in shops” inside Kohl’s stores. The leading beauty retailer had a similar arrangement with JCPenney but has now found a new home at Kohl’s.

Beauty has been a focus of Kohl’s for a while, the CEO said. Beauty sales were up 40% although it still remains an underdeveloped category. There is plenty of white space ahead for the beauty category, based on demographic trends. Most notably, Kohl’s boasts 65 million customers of which 70% are female.

“You can do the math,” she said.

Sephora’s stores inside Kohl’s offer consumers greater convenience, including through the online channel. Also, Sephora’s weakness of not being easily accessible has been addressed as part of the Kohl’s partnership.

But investors expecting early results on day one may need to revisit their thesis. The CEO said it will take “a couple of years” to fully build out its Sephora partnership. After one year, the company expects 200 Kohl’s stores to have a Sephora store inside. By year three, management is targeting 850 Sephora stores inside a Kohl’s location.

Attracting a new crowd

Kohl’s is confident that inserting a Sephora store in its store will “drive traffic and relevancy,” Gass told Bloomberg. Kohl’s also believes this store format leans towards the future of retail and will be required to “evolve the store experience.”

“We’re going to attract a lot of new, younger customers that may be going to Kohl’s for the first time. They’re not only going to find great beauty but other categories as well.”