Good results from the other guys' marketing

J.C. Penney and Kohls reported good quarterly results:

Wal-Mart may be whimpering, and Federated Department Stores may be struggling. But both J.C. Penney and Kohl's Thursday announced better-than-expected third-quarter results, and bullish predictions about the quarter ahead.

Good for them. But the amusing part of the report was this:

The company also said J.C. Penney benefited from the extensive marketing campaign for Macy's stores, which sent more people shopping at the mall.

Kohl's opened 65 stores today

That's a lot of stores, folks. And this is a company that is doing very well.

The company’s financial picture is the envy of the retailing industry, analysts said. Revenue is up, to $13.4 billion last year, from $6.2 billion in 2000, during which time profits rose to $842 million, from $372 million. Shares of Kohl’s rose $1.61, to $69.14 on Wednesday.

And on Thursday, when the nation’s retailers report September sales for stores open at least a year, a closely watched industry measure, Kohl’s is expected to report a 16 percent increase, above the industry average, which is in the single digits.

Kohl's has done this well by being determinedly mid-market:

The no-frills, no-mall, no-full-price retailing model of the Kohl’s department store has turned the once-quiet Wisconsin company into a clothing industry powerhouse ...

So why am I reading this:

So the chain’s once-steadfast focus on the classic, traditional consumer — who had a family and bought snowflake mock turtleneck sweaters and plaid button-down shirts — has expanded to include clothing like white fur vests from Daisy Fuentes, a brand exclusive to Kohl’s.

And this:

In a coup, Kohl’s wooed the designer Vera Wang — a name associated more with Sak’s and Bloomingdale’s than discount retailers — to design a line of contemporary clothing, handbags, shoes and home goods. The products will reach stores in autumn 2007.

And this:

The company has said it will make women without children, who typically have more disposable income and crave more fashionable merchandise than the average Kohl’s shopper, a priority in its merchandise and marketing.

Why is it that stores have this craving to move "up-market"? I have always suspected that it's because the execs are embarrassed to be running a store where they and their friends wouldn't be caught dead shopping.

But then I'm a cynic.

Obviously, the people who are running Kohl's are successful merchants who presumably know their market a whole lot better than I do, but every time I read about a store moving up-market, I hear a voice whispering "sell that stock."

Penney tackling Kohl's off-mall

JCPenney is reported to be going off-mall, pitting it head-to-head with Kohl's.

They're planning 200 new stores in the next few years -- this year they will be opening 29, of which 20 will be off-mall locations.

Building new stores beyond malls gives J.C. Penney more flexibility in location, allows the company to locate closer to its customers.

It's a strategy that's worked for fast-growing Kohl's the past 15 years and could cut into the Menomonee Falls company's market share throughout the United States.

Other indications that they may be targeting Kohl's are the store layouts and merchandise assortments, which are similar to Kohl's:

The off-mall stores are slightly smaller than traditional, mall-based Penney's and are built on one level, rather than two. The stores also are laid out differently, with a central checkout stations. They offer clothing and home items, but not furniture.

With that concept, J.C. Penney is chasing the same type of customers as Kohl's...

Kohl's, though, is planning even more growth, with 500 new stores projected in the next five years. If both chains meet their plans in new-store openings, they'll be roughly ties at about 1200 stores each.

I've got to wonder if there's enough business to support that many stores.