Kohl’s Plans Sephora In-Store Shops, Sending Shares Soaring

(Bloomberg) -- Sephora reached a deal to open shops inside Kohl’s Corp. locations, expanding the beauty brand’s reach into the suburbs and sending Kohl’s shares to the highest level since early March.

Kohl’s, which has previously said it would expand its beauty assortment, will open the first 200 locations next fall, according to a statement. There will be at least 850 in-store Sephora shops by 2023. Sephora will continue operating inside of J.C. Penney’s locations until the end of its existing agreement, J.C. Penney said.

Kohl’s shares jumped as much as 16% in New York trading.

The expansion into Kohl’s will allow Sephora to get better access to suburban shoppers, Sephora USA Chief Executive Officer Jean-Andre Rougeot said.

“For us it’s always been a question of reach,” Rougeot said. “One challenge has been that our real estate portfolio has been mainly an urban mall store portfolio, with stores that perform extremely well, but do not reach into the suburban U.S.”

In addition to adding the 2,500-square-foot shops, Kohl’s will convert its online beauty selection to exclusively sell an assortment of Sephora’s offerings, it said. The companies didn’t share terms of the agreement.

“Shop-in-shop” concepts let retailers offer customers new experiences and a wider selection of brands. Walgreens Boots Alliance Inc. offers Birchbox products in some of its locations, while Target Corp. last month inked a deal with Ulta Beauty Inc.

Rapid Change

The beauty industry has seen a rapid change this year amid the pandemic, increasing the urgency to try new ideas. With women representing 70% of its consumer base, Kohl’s sees this push as a way to keep existing shoppers while also capturing new ones as part of its longer term strategy to expand further into beauty and wellness, CEO Michelle Gass said.

The deal will ultimately pressure J.C. Penney, which filed for bankruptcy earlier this year, according to Bloomberg Intelligence retail analyst Poonam Goyal. The department-store, which filed for bankruptcy earlier this year, has touted its Sephora tie-up as a traffic driver.

The Wall Street Journal reported the news earlier.

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