Kohl’s offers round-the-clock shopping in dash to boost a tepid holiday season

December 23, 2013

At 3 a.m., Christmas carols played through the loud speaker at the Kohl’s in Silver Spring. “Duck Dynasty” doormats were marked down 80 percent, and candles were discounted 50 percent. About a dozen employees stocked handbags and children’s clothing.

But there were no shoppers.

An hour passed in the wee hours of Sunday morning; still nobody. Meanwhile, the drive-through at the McDonald’s across the parking lot attracted a steady stream of cars.

In a holiday season marked by large-scale discounts, seemingly never-ending Black Friday deals and free overnight shipping, Kohl’s is taking its efforts to an extreme, keeping stores open around the clock Friday through Christmas Eve. Like many retailers, Kohl’s is battling sagging profits with a frantic attempt to draw in last-minute customers and avert a holiday disaster.

On Monday, retailers such as Nordstrom, Brookstone and Crate & Barrel were offering free overnight shipping. Bloomingdale’s, owned by Macy’s, was touting a new round of last-minute discounts — dubbed the “procrastinators have all the fun” sale — offering 15 percent off nearly all items through Christmas Eve.

Blizzard Entertainment, the video-game company, took its promotions a step further, extending Black Friday discounts through 2014.Even Target, which has seen relatively strong profits this year, amped up its deals before being hit by a credit card breach that affected up to 40 million shoppers. The retail giant was forced to go further to draw in potentially skeptical customers in the crucial days before Christmas, offering 10 percent off all in-store purchases.

Despite data showing that the economy is expanding at a surprisingly strong pace, it has been a tough year for many retailers, which rely on holiday spending for up to 40 percent of their annual sales. Wealthy consumers are propping up high-end retailers such as Tiffany’s and using cheap financing to make big-ticket purchases, including cars.

But retailers catering to low- and moderate-income shoppers are still making up ground from a dismal back-to-school shopping season and grappling with customers suffering through slow income growth and the impending loss of long-term unemployment benefits. For those shoppers, staples such as apparel and toys are still a stretch. The shorter-than-usual holiday shopping season isn’t helping, either.

“Customers are increasingly desensitized by the amounts of discounts out there,” said Brad Wilson, founder of the sale-tracking Web site BradsDeals.com. “It used to be that 15 percent off was considered a good deal. Now it has to be at least 30 or 40 percent to catch anyone’s attention.”

At 4:38 a.m. Sunday, Karen Byrne was the only shopper at a Kohl’s in Aspen Hill. Md.

The 48-year-old said she hadn’t planned on shopping that early. But because she was awake and the store was open, she thought, why not?

“I’m just going to pick up a few things,” she said.

For the first time in at least seven years, customers spent less Thanksgiving weekend — the traditional kickoff to the holiday shopping season — than they did the year before, according to the National Retail Federation. Overall holiday spending is expected to be tepid, too, with the trade group predicting a 3.9 percent rise in sales.

“In general, retailers have not seen the sales they would like to up to this point,” said Keith Jelinek, a director at the consulting firm AlixPartners. “They are watching their sales figures on a daily basis, if not hourly, and making decisions as they go.”

Analysts say one of the most dramatic moves this year has come from Kohl’s, which is keeping nearly all of its 1,158 stores open for 108 hours. Toys R Us, Macy’s and Kmart are taking similar measures, but not for as long or at as many stores.

In the third quarter, Kohl’s posted an 18 percent drop in profit, to $177 million, while revenue dipped 1.02 percent, to $4.44 billion.

“I would not use the word ‘desperation,’ but Kohl’s has had its ups and downs in the last two years,” said Paul Swinand, a retail analyst for Morningstar. “They had a crummy third quarter, and they’re hoping to turn that around.”

More often than not, the people who stopped by area stores in the middle of the night said they were picking up one or two items — not checking off their entire holiday lists.

“It’s not busy today,” said Andrew Cheruiyot, a security guard at the Silver Spring Kohl’s store, where employees outnumbered shoppers for most of the night. “Maybe people are tired.”

“I don’t know why there are no people,” Cheruiyot said five hours into his shift. “When I came in at 11 [p.m.], it was busy. But now everybody has gone home.”

Kohl’s, founded in 1962 in Menomonee Falls, Wis., has carved out a niche catering to Middle America. The company expanded rapidly during the early 2000s, opening more than 700 stores in 10 years and forging partnerships with designers such as Vera Wang and Dana Buchman. Many of its stores were built in new strip malls that attract young crowds.

But eventually the pace of store openings slowed, and customers grew tired of the growing number of private brands by the likes of reality TV personality Lauren Conrad and Food Network chef Bobby Flay. (The company is rethinking its approach and plans to add more national brands, such as Juicy Couture and IZOD, to its mix next year.)

“The problem is, once you [tick] people off, it’s hard to get them back,” Swinand said. “The only thing saving them now is that Sears and J.C. Penney are on the same boat.”

Sears and J.C. Penney, among Kohl’s largest competitors, posted more than $1 billion in combined losses during the third quarter. Revenue, meanwhile, fell 6.6 percent at Sears and 5.12 percent at J.C. Penney during that period.

“Kohl’s and its competitors have certainly had a less-than-robust year, and the economy has got to be the bugaboo,” said John Collopy, a retail analyst for the brokerage firm Carl M. Hennig.

Analysts say it is too soon to tell whether the strategy employed by Kohl’s will pay off, and a company spokesman declined to comment. Even if Kohl’s racks up healthy sales in the middle of the night, the cost of keeping its stores open could cut into its profit margin.

But Hank and Kay Griffith aren’t complaining. The couple said they knocked out all of their Christmas shopping early Sunday.They left their Olney home at 2:30 a.m., stopped at a Toys R Us — where they were the only shoppers — and then spent three hours at Kohl’s.

“It’s the perfect time to shop. There’s nobody here,” Hank said as they entered the Aspen Hill store at 4:45 a.m.

By the time the Griffiths left with a dozen gifts in tow, Hank said he had seen only two, maybe three, other shoppers.

“We accomplished everything we needed to,” he said. “And we were back home in time for breakfast.”

Abha Bhattarai covers local banking, retail and hospitality for The Washington Post’s Capital Business section. She has written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.
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