Will Private-Label Athleisure Launch Save Kohl’s in 2021?

Being a department store based in malls and other shopping centers has been a tough job. It was tough long before the coronavirus led to massive shutdowns around the nation, and it’s been even tougher in the aftermath of the instant recession. If there is one lesson that all retailers can learn, it is that grocery stores and other retailers have been able to increase their profit margins by creating private label items.

Kohl’s Corp. (NYSE: KSS | KSS Price Prediction) wants to see if it can juice its profits and sales with a private label in popular athleisure clothing. With sales of almost $20 billion last year, the Refinitiv consensus estimate is now looking for Kohl’s to generate only about $15.2 billion in total revenue this year.

Kohl’s is set to launch is FLX specialty athleisure brand at select stores and online. Launching designs and getting clothes made takes some time, and the launch is scheduled for March 2021. Unfortunately, that means that it will not get any bump from the products in the current fiscal year, even though it is likely having to invest capital in the current year.

This new “flex” line for men and women is being touted as “a modern athleisure brand featuring stylish active separates made with high-quality performance fabrics and functional details.” The line will focus on higher-end athleisure and is said to include bottoms, shorts and tee shirts, and Kohl’s said that the brand will be refreshed seasonally with key transitional (seasonal) items.

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Kohl’s spelled out that the FLX brand will fill a white space in its existing current private brand portfolio and national brand portfolio, and it also lays out with which brands it will compete. The active brands that were named included Tek Gear, Adidas, Champion, Under Armour and Nike, as well as casual brands such as Sonoma Goods for Life, Croft & Barrow and Columbia.

Launching a private label effort is not a new idea. Many retailers do it, well beyond groceries and clothing. While investors have cheered the effort, launching a new private label brand is not a riskless endeavor.

Retailers have had a hard time drawing shoppers into their stores, and the online defection already was happening long before many people were scared of going out in public because of the pandemic. There is also a risk that private label brands are not well received or improperly marketed.

Analysts already are calling for sales to recover by almost 15% to $17.43 in the forward fiscal year, but that still doesn’t get to a recovery back to calendar 2019 sales, and it is still down from its peak the year before.

Investors gave Kohl’s the benefit of the doubt in their initial reaction. The stock was last seen up 7% at $20.73. Kohl’s has a 52-week range of $10.89 to $59.28, and the consensus target price is $21.06.

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