Kohl's plans to have 200 Babies R Us stores in its stores by the end of September. The retailer will sell a wide range of baby products, including strollers, car seats and cribs.
Thanks to: Kohl's
WOODLANDPARK, NJ — Kohl's think small to boost sales.
The retailer is opening Babies R Us stores in its existing stores across the country starting this week, and plans to have 200 by the end of September. The stores will sell a variety of baby items the company has not offered before, including shampoo, strollers and car seats. Kohl's previously sold only baby clothes.
With the move, the Wisconsin retailer aims to better cater to young families, whether they’re decorating their homes, preparing for the start of the new school year or getting ready to welcome a new addition. Most of the retailer’s approximately 1,170 stores are located in suburban shopping centers, within easy driving distance for busy parents running errands or grocery shopping.
In addition to the baby category, Kohl's is also expanding its assortment of home furnishings, gifts and impulse items. CEO Tom Kingsbury estimated in late May that those expanded categories, which include Babies R Us, represent “a $2 billion-plus sales opportunity” over the next several years.
Still, the U.S. demographics aren’t in Kohl’s favor. According to preliminary data from the U.S. National Center for Health Statistics, the number of births in the U.S. last year was 3.59 million, the lowest number of births in more than 40 years.
During a tour of the New Jersey store on Wednesday, Chief Merchandising Officer Nick Jones showed off the first Babies R Us store. Customers walking through the store can see and feel many of the higher-end items, such as strollers, cribs and high chairs, outside of the cardboard box. The stores feature many prominent baby brands, including Hatch, Frida, Graco and Baby Bjorn.
In recent weeks, online shoppers have also noticed Babies R Us on Kohl's website. The site has twice as much merchandise as the roughly 800 to 1,000 items available in most stores, the company says. Kohl's also will launch a baby registry in the fall.
The stores vary in size, but are set up alongside the baby and children's clothing currently found in all stores. Jones said more merchandise for expectant families is also on the way, including baby clothes from Nike. It is introducing maternity wear from Motherhood, a direct-to-consumer brand, that will be available exclusively in Kohl's stores.
The retailer is rolling out Babies R Us stores at a time when it needs growth engines. Kohl's net sales totaled $16.6 billion in the most recent fiscal year, which ended in early February. That’s a nearly 14% decline from five years ago.
Kohl's expects current full-year net sales down 2% to 4%. It reported a surprise net loss of $27 million for its fiscal first quarter and lowered its full-year guidance in late May.
Kohl's shares have fallen 24% this year, lower than the S&P 500's nearly 16% gain over the same period.
Like other retailers, Kohl's is facing shoppers who are delaying discretionary purchases and spending more on everyday expenses like groceries and housing. But Kohl's' challenges go beyond that, he said. Dana Telsey, CEO and Chief Research Officer of Telsey Advisory Group, said it needs to sharpen its merchandise to capture the attention of new and existing customers.
“There is so much competition from others,” she said. “A brand has to stand for something and matter.”
At Kohl's Babies R Us stores, customers can touch and feel the higher-priced items on their shopping or checkout lists.
Thanks to: Kohl's
Fewer births, but more premium products
Kohl's is betting on the baby category because innovative products and higher-end items such as luxury strollers are driving spending.
Sales of baby products totaled $7.5 billion for the 12 months that 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, cribs and breastfeeding systems.
Stephen Hinz, an industry consultant at Circana who tracks baby product sales, says customers' willingness to pay for high-quality baby items has fueled spending.
He noted that the U.S. Census Bureau found that the average age of American women giving birth is 30.
“People are in a very different stage of life,” he said. “They're older. They're more established in their careers. They're more likely to own a home. They have more disposable income. And they have more influence over the things they want to put into those homes.”
Hinz said the market has remained stable despite the lower birth rate, as parents opt for luxury items such as natural wood cribs and car seats that swivel to make it easier to get a baby in and out. And families will stretch their budgets to support a child's health and safety, even during tough economic times, he said.
Plus, new parents have more retailers and brands to choose from and new ways to register baby items. Major retail chains Goal And Walmart have expanded their baby departments. Macy's launched its own baby registry in late April. And universal registries, such as Zola and Babylist, have gained popularity by allowing customers to choose items from retailers’ and brands’ websites.
In a March interview with CNBC, Kingsbury said there was market share to be gained in the category, citing the bankruptcy and store closures of Bed Bath and Beyond, the parent company of Buy Buy Baby.
And, he said, customers who shop at Babies R Us also buy items from other departments.
Kohl's is making a similar move to what it did with Sephora beauty shops, which it is opening in all of its stores. During earnings calls, Kohl's leaders said the shops are attracting younger and more diverse customers.
Jones said Kohl's will not decide whether to open Babies R Us in more stores until it hears the results from the first 200 stores.
Kohl's will place Babies R Us stores next to its existing baby clothing stores. It will also add related merchandise, such as Nike baby clothes and Motherhood maternity wear.
Thanks to: Kohl's
Is Babies R Us Still Relevant?
With the relaunch of Babies R Us, Kohl's wants to test whether the brand is still relevant or has become boring.
The Babies R Us brands and its former parent company Toys R Us are now owned by WHP Global, a brand management firm based in New York City. The company has bought and attempted to build 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 agreement.
In addition to the deal with Kohl's, WHP Holdings also struck a deal with Macy's, which has opened Toys R Us stores in many of its department stores.
According to Natalie Gordon, founder and CEO of Babylist, Kohl's move is risky because tastes have changed since the brand's heyday in the '80s and '90s.
She said many retailers fall short in their customer experience with little opportunity to test products hands-on. And she recalled her frustrations with retailers when she was preparing for her first child 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 woman having a baby. It didn't appeal to me at all.”
The latest version of Babies R Us at Kohl's features the brand's familiar font, but Kohl's and WHP have given the brand a more modern look, said Christie Raymond, Kohl's chief marketing officer.
“There is a lot of credibility,” she said. “But we had to modernize.”
The stores are decorated with stark baby pictures instead of pastel colors or cartoon mascots, like Toys R Us' Geoffrey the Giraffe.
Kohl's will also use a marketing tool that didn't exist during Babies R Us' heyday: the company plans to partner with influencers to promote the stores on Instagram and TikTok.