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Sephora And Kohl’s Partner Up To Open Mini Shops

By Jacob Wolinsky. Originally published at ValueWalk.

Sephora

CNBC Exclusive: CNBC Transcript: Kohl’s CEO Michelle Gass and Sephora Americas CEO Jean-André Rougeot Speak with CNBC’s “The Exchange” today, discussing their partnership to open mini shops.


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WHEN: Today, Tuesday, December 1st

WHERE: CNBC’s “The Exchange”

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Kohl’s CEO Michelle Gass and Sephora Americas CEO Jean-Andre Rougeot to discuss their recent partnership on CNBC’s “The Exchange” (M-F, 1PM-2PM ET) today, Tuesday, December 1st. Following is a link to video on CNBC.com:

Sephora Partners With Kohl’s To Open Mini Shops In 850 Stores

LAUREN THOMAS: Joining me now to discuss this deal are Kohl’s CEO Michelle Gass and Sephora Americas CEO Jean-André Rougeot, thank you both for being here with me today. Michelle, my first question is for you. Why is now the right time for Kohl’s to make such a big bet in beauty and walk us through what exactly this experience is going to look like when we visit a Kohl’s store?

MICHELLE GASS: Sure, Lauren well it’s great to see you. I would say a couple things. First off, just a couple months ago, we launched our new strategy. We’ve had our sights set on beauty for some time and with all the disruption that’s happening in the retail industry, we’ve really taken a step back and asserted a new strategy to be the destination for all things, active, casual, wellness and beauty for the family. So, we’re going to be making certain categories like active and athleisure, and beauty of course much bigger and then downsizing or exiting other categories. Like I said, we’ve had our sights set on beauty for some time. Kohl’s as big as we are, we’re very underrepresented in beauty, yet we serve 65 million customers, 70% which are female, and they’ve been telling us they want a bigger, bolder experience in beauty.

So, we could not be more excited, but to partner with the world’s expert in beauty, which is Sephora and I think, combining the expansive reach that we bring 1,160 stores, 95% which are off-mall so hugely convenient, coupled with our omni channel presence, you combine that with Sephora’s expertise and their loyal customers, we know that we’re going to convert a lot of our own customers as well as attract millions of new customers and younger customers into Kohl’s so this is a transformational partnership and deal, certainly for Kohl’s, I’d say for both companies. And then in practice, you know how that’s going to work, is we are building true shop-in-shops inside of Kohl’s. So, a typical Kohl’s is about 90,000 square feet.

The Sephora shop, which will be in prime real estate right in the front of the store, will be about 2,500 square feet. So, it will house many of the fantastic brands that you find at a Sephora today. We’re also doing something a little bit out of the box which is we are branding one of our doors. Most Kohl’s stores have two doors, so it’ll be unmistakable that there is a Sephora inside of Kohl’s and you’ll see that from a distance. So, again we could not be more excited and pleased with the announcement that we shared today.

THOMAS: Thanks for all that additional detail. Jean-André, I wanted to toss to you as well and this, this obviously is not your first time partnering with a big retailer. Back in 2006, you struck a deal with JCPenney. JCPenney has since filed for bankruptcy during the pandemic and they’re in the process of emerging, but you will be cutting ties with them moving out of those stores and now moving into Kohl’s. So, why did Kohl’s make sense as the next partner for you?

JEAN-ANDRÉ ROUGEOT: Well, Lauren as you know, you know Sephora is the number one prestige beauty retailer in America and has been for a few years now. You know, we also obviously have a very large .com presence and we have been delivering you know surprise and delight to consumers for a long time for a very unique wide assortment for really expert beauty, you know, beauty advisors. Our problem is reach. You know, we have only 500 stores and most of them are in urban centers or traditional malls and we have not been able to reach you know consumers in American suburbia, in the Carolinas, as you know, Ohio, in Texas, in Florida, where we would like it to be.

And the reason this deal is so great is that we are going to be able to leverage the extensive network of Kohl’s but more importantly, the fact that their locations are so convenient, you know, off-malls, easy to park, easy to access, that is going to be a blessing for consumers to be able to discover Sephora beauty in an easy and convenient way right next to where they live. So, for us, it’s a transformative deal. We will triple the network of stores in the next two or three years.

We’ll also be the exclusive beauty retail partner on Kohls.com, as you know, Kohl’s has done significant investments in .com, and also BOPIS and curbside, so we’ll obviously leverage all of that investment to help Sephora so it’s a partnership that’s gonna be very complimentary. Very few of our stores overlap. We are more urban, they’re more suburban so it’s a great mix. It’s a big win for Kohl’s consumers and Sephora’s consumers. And it’s also a big win for our brand partners. It’s a way for them to get a much bigger reach across the US to a much broader consumer group.

MELISSA LEE: Michelle, how should investors think about how you make money from this partnership in terms of revenue sharing from the product sold, in terms of cross-selling, in terms of whether you’re catering and serving the existing customer base that you have or actually going to be able to bring in new customers who will then buy other items within your store?

GASS: Yeah so first, let’s start with the beauty opportunity. I mean this is a true partnership, we’re both all in for a long-term commitment, at least 10 years, hopefully decades beyond that. And so, the economic model is a shared operating profit model but, on the sales side, Kohl’s will book the revenue, own the inventory, etc. but from an operating profit, we will share in that so we’re both hugely vested in each other’s success, which is, which is fantastic. And in terms of, you know, the long-term opportunity for Kohl’s, this is a tremendous opportunity for us to acquire new customers, new younger customers.

I do think it will absolutely resonate and convert our existing customers, I mentioned 65 million customers, 70% of which are women, and we’re looking forward to converting those customers into being beauty buyers as well, but I think importantly, all these new customers we’re going to bring in, we’re going through a big transformation inside Kohl’s as well so we’re looking forward to converting them not only into Sephora but also integrate Kohl’s customers over the long term.

THOMAS: Michelle, I wanted to ask you know this announcement obviously comes in the thick of the holiday season and we just got through Black Friday and Cyber Monday. You know, what are you seeing at stores? We saw there was a large decline year over year in traffic in stores on Black Friday and a huge growth online as well. So, how are you working through that and any feedback from the weekend?

GASS: Yeah, Lauren so as we shared earlier in the month, we were really pleased how we kicked off the holiday season. Like many retailers, we did a lot of things to move some of that demand up earlier as customers were telling us that they wanted to shop early. A lot of the categories that were trending going into the holiday season continue to do well, home, athletic, even toys for Kohl’s and we’re pleased that we’re seeing lots of customers shopping us online but also coming to our stores. We still have a lot of big days and weeks ahead of us so Lauren, I look forward to sharing those results when we, when we’re on the other side of the holiday season.

THOMAS: Absolutely. Thank you. Well, thanks to Kohl’s CEO Michelle Gass and Sephora Americas CEO Jean-André Rougeot for joining me this afternoon to talk about this deal. Back to you, Melissa.

The post Sephora And Kohl’s Partner Up To Open Mini Shops appeared first on ValueWalk.

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