As Target and Kohl’s released earnings this week, one thing was clear: the chains are continuing to rapidly expand private labels and exclusives.

Bigger footprints
Both chains have been pursuing that strategy for several years, but it continues to expand, as each strives to differentiate itself from competitors and boost margins. And as Target and Kohl’s aired their private label strategy, Bed Bath & Beyond unveiled its own plans.

Target started with Cat and Jack (children’s apparel) and Pillowfort (children’s home goods) in 2016, both which generated $2 billion in sales 2020. It has since added 28 other labels – the year-old activewear brand All in Motion topped $1 billion in annual sales earlier this year — with more on the horizon for this year. Target has 10 private label brands with $1 billion or more in annual sales, double the number from a year ago. The private push began in 2015 as Target ended longtime DTRs with several brands including Cherokee (Apex Global Brands).

A third of sales
All in, private label accounted for about a third of Target’s annual sales in the year ended Jan. 30 ($30.8 billion), Christina Hennington, Chief Merchandising Officer for Hardlines, Essentials and Capabilities, told analysts this week.

“Target’s own brands continue to generate strong growth because of our approach to creating, designing and maintaining these brands,” Hennington said. “They’re not just private labels, they’re brands our guests trust, they’re brands our guests love.” For example, Target gathered insights from 15,000 customers and fitness professionals and had staff attend exercise classes in developing the All in Motion line, Hennington said.

Similarly, Kohl’s dropped eight “down-trending” women’s brands last year, including Mudd (Iconix) and Juicy Couture (Authentic Brands Group). Meanwhile, it is adding its FLX athleisure label this month to go along with its longtime Sonoma, Jumping Beans, Urban Pipeline and other private brands.

“We are reflowing our categories to reflect our new strategy or evolve strategy around active, athleisure, casual and really clarifying our brands across a narrower set of choices,” Kohl’s CEO Michelle Gass said in releasing earnings. “With female customers, the new strategy attracts a younger and broader demographic. It will have a halo affect that gives customers all parts of our business, including flagship brands that we’ve had for some time on the private label side.”

The private label business is being supplemented by both chains with exclusive programs with national brands. Target, which has ongoing exclusive programs with Disney and Land’s End, recently added a DTR with Levi’s for home goods and will introduce an Ulta Beauty in-store format at l00 locations this fall. And those are in addition a new Apple in-store format that will debut at 17 locations this fall with staff specially trained in Apple products.

For its part, Kohl’s will launch a partnership with Sephora online Aug. 1 with a 2,500-sq.-ft. in store format at 500 locations in the fall. Sephora will add 100 beauty brands to Kohl’s beauty products mix including the licensed Rare Beauty by Selena Gomez label.

The new strategies come as Target and Kohl’s remain cautious about growth. Target didn’t release a sales forecast for the year, while Kohl’s projected a mid-single digit sales increase, logical given that its stores were closed last spring during the early stages of the pandemic in the U.S. Target plans to open 30-40 stores this year with a focus on its 49,000-sq.-ft and under format, including its second and third locations on college campuses, at the University of Georgia and University of Michigan. It will remodel another 150 locations this year and another 200 in 2022, reviving a program that was delayed last year. Kohl’s plans to renovate 675 stores during the next two years.