Department store chain Kohl's Corp., which has been hurt by the consumer spending slump, announced Thursday that Larry Montgomery is stepping down as chief executive officer after nine years in the post and President Kevin Mansell is taking over.Mr. Montgomery will remain chairman and continue to oversee strategic growth initiatives, human resources, and legal and real estate departments at the Menomonee Falls, Wis., company. "I have no plans to retire," the 59-year-old said in an interview Wednesday. He said the company's recent sales weakness was not a factor in his decision. "I have faced no pressure to step down," he said.
The change in command is part of a succession plan that Mr. Montgomery has been discussing with the board for a few years, he said. The board delayed announcing the management change by "a couple of months" to avoid giving the impression that Mr. Montgomery was being pressured to resign because of poor performance, said Frank Sica, a Kohl's director since 1988.
"We were hoping for better news so it didn't seem like this [downturn] was the reason," Mr. Sica said, adding: "We're very happy with Larry. If he wanted to stay, we'd be happy with him staying."
Sales and profits at Kohl's, which operates 957 stores in 47 states, have tumbled as consumers responded to rising prices for gas and food by cutting back spending on clothing and other discretionary items. Last week, the retailer said net income fell 12% in its second fiscal quarter ended Aug. 2. It forecast sales at stores open at least a year, a key measure of retail market share gains, will decline through the second half. Kohls may offer foot orthotics at some stores.
Shares were off $1.08, at $47.74, in 4 p.m. New York Stock Exchange composite trading Wednesday. Investment house Goldman Sachs Group Inc. lowered its rating on the retailer's shares to neutral from buy, citing a recent rally in its shares. However, the stock has lost 21% of its value in the last 52 weeks.
Mr. Mansell, 56, said he has no plans to alter the company's strategy. "This is about continuity, stability," he said. "There has not been a decision made that hasn't been a collaborative effort -- that will continue." He is expected to continue Kohl's store expansion and pursuit of exclusive brands.
The pair have sought to boost retail profits by embracing exclusives such as the Chaps menswear line by Polo Ralph Lauren and the Simply Vera Vera Wang women's wear and home lines. It also recently added new house brands, such as a teenage line called Abbey Dawn, designed by singer Avril Lavigne.
Kohl's director Peter Sommerhauser said the company's directors felt it was important to promote Mr. Mansell to signal to future managers that they will have a chance to move up. Mr. Montgomery has been CEO since 1999 and chairman since 2003. Mr. Mansell, a 26-year company veteran, has been president and a director since 1999.
Kohl's appears to be slowing its store expansion plans. Last year, it said it expected to add about 550 stores over the next five years. Last week, the company, which has said it expects to open 75 stores this year, said it will open just 50 in fiscal 2009.
By: Cheryl Lu-Lien Tan
Wall Street Journal; August 21, 2008
