Kohl's plans to open 200 stores in its facilities by the end of September. The retailer will sell a wide variety of baby items, including strollers, car seats and cribs.
WOODLAND PARK, NJ — Kohl's is targeting smaller retailers to boost sales.
The retailer will open Babies R Us stores in its locations nationwide starting this week and plans to have 200 by the end of September. The stores will offer a variety of baby items the company has never sold before, including shampoo, strollers and car seats. Previously, Kohl's only sold baby clothing.
With the move, the Wisconsin-based retailer aims to better meet the needs of young families, whether they’re decorating their homes, preparing for back-to-school or expecting a new baby. Most of Kohl’s approximately 1,170 stores are in suburban shopping centers, just a short drive from busy parents running errands or picking up groceries.
In addition to the baby category, Kohl's is also expanding its range of home, gift and impulse products. CEO Tom Kingsbury estimated in late May that these expanded categories, including Babies R Us, represent “a more than $2 billion sales opportunity” over the next few years.
However, U.S. demographics are not in Kohl's favor. There were 3.59 million births in the United States last year, according to provisional data from the U.S. National Center for Health Statistics. That's the lowest number of births in more than 40 years.
During a tour of stores in New Jersey Wednesday, Chief Merchandising Officer Nick Jones introduced the first Babies R Us store. Customers who walk into the store can see and touch many of the more expensive items, like strollers, cribs and high chairs, out of their cardboard boxes. The stores feature many of the top baby brands, including Hatch, Frida, Graco and BabyBjorn.
In recent weeks, online shoppers have also seen Babies R Us on Kohl’s website. Its website offers twice as many products as the roughly 800 to 1,000 items available at most stores, the company said. Kohl’s will also launch a baby registry this fall.
Each store will be a different size, but will be located next to the baby and children’s clothing stores already in all stores. Jones said more products for expectant families are coming, including baby clothing from Nike. She’s also introducing maternity wear from Motherhood, a direct-to-consumer brand, that will be exclusive to Kohl’s stores.
The retailer is launching Babies R Us stores at a time when it needs growth engines. Kohl’s net sales totaled $16.6 billion in its most recent fiscal year, which ended in early February. That’s nearly 14% less than five years ago.
Kohl's expects current annual net sales to decline between 2% and 4%. In its fiscal first quarter, it reported a surprising net loss of $27 million and lowered its full-year outlook in late May.
Kohl's shares are down 24% this year, compared with gains of nearly 16% for the S&P 500 index over the same period.
Like other retailers, Kohl’s has had to deal with shoppers putting off discretionary purchases while spending more on everyday expenses like food and shelter. But Kohl’s challenges go beyond that, according to Dana Telsey, CEO and chief research officer of Telsey Advisory Group. He said it must refine its merchandise to capture the attention of new and existing customers.
“There’s been so much competition from others,” he said. “A brand has to stand for something and have relevance.”
At Kohl's Babies R Us stores, customers can touch and feel some of the most expensive items that might be on their grocery list or wedding registry.
Fewer births, but more premium products
Kohl's is targeting the baby category, as innovative, high-quality products, such as luxury strollers, drive spending.
Baby products sales totaled $7.5 billion for the 12-month period ended in May, up 4% from the same period in 2020, according to Circana, a market research firm that tracks the industry. It includes a wide range of items such as car seats, strollers, bottles, cribs, high chairs, strollers and nursing systems.
Stephen Hinz, an industry consultant at Circana who tracks baby product sales, said customers’ willingness to pay for high-quality baby items has driven spending.
She said the U.S. Census Bureau found that the median age of American women giving birth is 30.
“People are in a very different stage of life at that time,” he said. “They're older, more established in their careers, more likely to be homeowners. They have more disposable income. And that has a greater influence on the things they choose to bring into those homes.”
Hinz said the market has remained stable despite the low birth rate, as parents opt for more sophisticated items such as natural wood cribs and swivel car seats to make it easier to get a baby in and out. Families will adjust their budgets to support a child's health and safety even in tough economic times, he said.
Additionally, new parents have more retailers and brands to choose from and new ways to register for baby products. Major chains like Target and Macy’s have expanded their baby departments. Macy’s launched its baby registry in late April. Universal registries like Zola and Babylist have gained popularity by allowing customers to choose items on retailers’ and brands’ websites.
In an interview with CNBC in March, Kingsbury said there is market share available in the category. He pointed to the bankruptcy and store closings of Bed Bath & Beyond, the parent company of Buy Buy Baby.
And, she said, customers who shop at Babies R Us will also purchase items in other departments.
Kohl's is making a similar move to the Sephora beauty stores it's opening in all of its stores. In earnings conference calls, Kohl's leaders said the stores are attracting younger, more diverse customers.
Jones said Kohl's will decide whether to open additional Babies R Us stores in other locations after receiving feedback from the first 200 stores.
Kohl's will place Babies R Us stores next to its current baby merchandise. It will also add related products, such as Nike children's apparel and Motherhood maternity wear.
Is Babies R Us Still Relevant?
With the relaunch of Babies R Us, Kohl's will test whether its brand reputation is still relevant or has become obsolete.
The Babies R Us brands and its former parent company Toys R Us are now owned by WHP Global, a New York City-based brand management company. The company has purchased and attempted to rebuild other brands, including Bonobos, Rag & Bone, and Isaac Mizrahi. Toys R Us closed its stores after filing for bankruptcy in 2017.
Kohl's and WHP Global, which announced the deal in March, did not disclose financial terms of the deal.
In addition to the deal with Kohl's, WHP Global also has an agreement with Macy's, which has opened Toys R Us stores in several of its department stores.
Kohl’s move is risky because tastes have changed since the brand’s heyday in the 1980s and ’90s, said Natalie Gordon, founder and CEO of Babylist.
She said many retailers weren’t meeting customer expectations, with little opportunity to try products firsthand. She recalled her frustrations with retailers when she was preparing to have her first child about 13 years ago, which sparked the idea for Babylist.
“I felt infantilized by the brands that were out there,” she said. “Things were pink and blue with little cartoon characters. And I’m a pregnant woman. It didn’t resonate with me at all.”
Kohl's latest version of Babies R Us features the brand's familiar font, but Kohl's and WHP have given the brand a more contemporary look, said Christie Raymond, Kohl's chief marketing officer.
“There's a lot of credibility,” he said. “But we needed to modernize it.”
Stores are decorated with elegant photos of children, rather than pastel colors or cartoon mascots like Toys R Us’ Geoffrey the Giraffe.
Kohl's will use a marketing tool that didn't exist in the Babies R Us heyday. It plans to partner with influencers who can spread the word about the stores on Instagram and TikTok.