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Sephora Ditches JCPenney for Kohl’s: Why the ‘Mini’ Expansion Plan Could Yield Big Rewards for Both Companies

Mini Sephora shops embody a new partnership between the department store Kohl’s and the beauty supply retailer Sephora. The partnership brings with it real synergy.

Sephora and Kohl’s announced their new relationship – promising such Mini Sephora shops within Kohl’s locations — in December 2020. 

In April they outlined their business strategy in more detail and Artemis Patrick, Sephora’s executive vice president and global chief merchandising officer said:  “All customers who enter Sephora at Kohl’s can expect the same experience, and will find the most highly sought-after brands that Sephora clients have come to know and love at our freestanding Sephora locations and Sephora.com.”

But they are only beginning to implement the agreement now: more than 70 of the new mini-Sephora’s will open on August 20.

The mini-Sephoras will be architecturally distinct portions of the store. As Sephora explained in a statement on its website, “The Sephora at Kohl’s store in store will be a prominently located, fully-immersive, premium beauty destination, designed within a 2,500 square foot space. Kohl’s shoppers will receive the signature Sephora look, feel and experience at these locations.”

Each location will be staffed by beauty advisors whom Sephora will have trained. The advisors will provide consultations to shoppers and assist them with their cosmetic needs.  

Sephora’s History

Sephora is a Paris-based company, since 1997 a subsidiary of LVMH, that opened its first US store in New York City in 1998. 

Sephora features nearly 300 brands of beauty products, including NARS Cosmetics, Fenty, Milk, Urban Decay, Benefit Cosmetics, Lancome Cosmetics, philosophy, YSL Beauty by Yves Saint Laurent, and Bobbi Brown Cosmetics. 

On February 1, 2009, Sephora entered into a joint enterprise operating agreement with another retail chain, JC Penney. 

On March 18, 2020, though, JC Penney’s closed most of its stores because of Covid-19. On April 2 it furloughed most of its hourly workers. 

The pandemic forced Sephora, and others in the cosmetics industry, to focus most of its energies on the promotion of online sales. Furthermore, makeup sales during the pandemic suffered across the industry: mandatory face coverings meant, for example, that no one outside her “bubble” could even see a woman’s lips. So why buy lipstick?

As JCPenney began to reopen its operations that May, it found that Sephora was no longer interested in the “Sephora inside JCPenney (SiJCP)” locations. JCP filed a temporary restraining order to prevent Sephora from blocking it from reopening with SiJCP. 

The dispute was settled. Most of the terms of that settlement have been kept under wraps, but the SiJCP locations continue to operate, with an understanding that the partnership will expire next year. 

The simplest inference from that history, and from the new Kohl’s deal, is that Sephora is still committed to a brick-and-mortar presence, but it knows that it needs a brick-and-mortar partner that is reliable.

Kohl’s can gain from the high-end name and the foot traffic that the Mini Sephora shops will bring. Sephora gains from the familiarity — to many of its actual and potential customers — of the Kohl’s real estate. Photo credit: Shutterstock.com

Kohl’s History

Kohl’s has been a public company since 1992 (NYSE: KSS) After a strong start in the midwest it expanded into the New York metropolitan area after Caldor’s liquidation at the turn of the millennium. Over the following years it continued its expansion, and is now a presence across the U.S. 

Kohl’s attempted an unsuccessful experiment with the low-end of the retail clothing market in 2016, with Off/Aisle clothes (re-selling its returned but still like-new merchandise). The Off/Aisle flop may have contributed to a sharp decline in Kohl’s stock value in January 2017. 

Since then, Kohl’s efforts at expansion have consistently worked in the other direction.

The two new partners, then, have a natural synergy. Kohl’s can gain from the high-end name and the foot traffic that the Mini Sephora shops will bring. Sephora gains from the familiarity — to many of its actual and potential customers — of the Kohl’s real estate.

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Christopher Faillehttps://jamesian58.blogspot.com/
Christopher Faille has written on a variety of legal, regulatory, and financial issues for decades. He covered hedge funds for Lipper HedgeWorld and Reuters, wrote on investing for Forbes, and was a pioneer on coverage of cryptocurrencies and the state-legal marijuana markets.

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