S. Economy and declining consumer spending cause the company has no stores outside of the US and does not have an international presence to serve as a buffer to fluctuations in the US economy. However, Kohl's discounted pricing allows it to ride out tough economic times better than its competitors. Economic Trends and Forces Exclusive and private label merchandise account for almost half of Kohl's sales, a figure Kohl's has worked to increase by adding new exclusive brands like Helix, Mud, Dana Bushman, and Hang Ten.
Department stores are increasingly seeking to distinguish themselves and earn higher profit margins by offering exclusive brands ND private label brands. Exclusive brands are brands marketed under the wholesaler's name that are sold only in a particular chain; one exclusive brand at Kohl's is the Chaps line by Polo Ralph Lauren. Private label brands are produced by wholesalers, but sold under the brand name of the retailer. Exclusive brands such as Simply Vera by fashion designer Vera Wang can help draw customers into Kohl's stores, as the products can only be found at Kohl's.
Kohl's own private label products are typically priced lower than branded merchandise, but have a higher profit margin or Kohl's as the retailer is able to receive the good at a lower cost by avoiding branded manufacturers. Higher raw materials cost may force an increase in clothing prices, in a recovering economy, the last thing that consumers want is higher prices, especially on necessities like clothing. Many in the fashion industry are expecting price increases of as much as $2 for a t-shirt.
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As consumers ease back into discretionary spending, higher clothing prices delay the recovery as they discourage spending. Companies like Kohl's rely on consumer's spending money on clothes, and if higher prices courage consumer spending, the company's bottom line will suffer due to these Adapts to Change One of the reasons that we believe Kohl's is destined for growth is because Kohl's has dedicated increased expenditures towards investing in E-commerce. We have realized that Kohl's E-commerce has demonstrated accelerated Internet sales in the past few years after its inception in 2001.
With the increase in online sales and the increased opportunities in online markets, Kohl's continues to adapt to changes in the industry while remaining true to its customers' values. Kohl's has also dedicated a great deal of time and resources toward developing its IT systems and store renovations. As previously mentioned, Kohl's recognized a decreasing amount of traffic in its stores and thus a slight decrease in in-store sales. The decrease in in- store sales is an industry-wide trend.
Unlike its competitors, Kohl's is taking action to combat this decrease in in-store activity in several ways. Clearly its focus on E- Commerce development will recapture a greater number of customers that prefer to shop online. Additionally, in order to reduce expenses and improve its bottom line, Kohl's has focused on renovating stores rather than building additional sites. The decrease in new-store construction is a clear indicator that Kohl's has recognized the industry-wide trend of fewer in-store purchases.
On that note, Kohl's has also renovated a great number of stores (and will continue to do so in the future) to decrease their payroll expenses and improve store efficiency. The investments in IT have also served to revamp both E-commerce and in-store sales and efficiency. Some of the IT improvements include a POS system and an enhanced inventory tracking yester. All of these investments will help Kohl's reduce its expenses and improve its margins. Both of these measures will help to boost Kohl's stock price down the road.
Supply Chain Kohl's Department Stores has expanded its commitment to supply chain sustainability in 2012 to include analysis of 50 private brand vendors, as well as the company's top 325 national brand vendors, which represents approximately 90 percent of the company's merchandise spend. The company also surveyed 38 non- merchandise business partners in the areas of transportation and consumables, according to its newly released 2012 corporate social responsibility report.
Kohl's leverages these scores in key areas of sustainability to foster consistent dialogue and education and to help vendors establish their own programs and commitments. As of the end of fiscal 2012, Kohl's achieved 752 Energy Star-certified locations, adding 75 stores in 2012 with a goal to reach 800 certified locations by 2015. The retailer also purchased more than 1. 5 billion kHz of renewable energy credits; offsetting 100 percent of the company's purchased electricity use and achieving net ere emissions for the third consecutive year.
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