Montgomery, Larry 1949–

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Larry Montgomery
1949–

Chief executive officer and chairman of the board of directors, Kohl's Corporation

Nationality: American.

Born: 1949.

Career: Block's, 1985–1987, executive management positions culminating in chief executive officer; L. S. Ayres, 1987–1988, executive management positions including senior vice president and director of stores, general merchandise manager, Softlines; Kohl's Corporation, 1988–1993, senior vice president, director of stores, 1993–1996, executive vice president of stores, 1996–2000, vice chairman of board of directors, 1999–, chief executive officer, 2003–, chairman of the board.

Address: Kohl's Corporation, N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051; http://www.kohls.com.

■ Department store chain executive R. Lawrence "Larry" Montgomery—a thirty-year-plus veteran of the retailing industry—was the CEO and chairman of Fortune 500 company Kohl's Corporation. Montgomery ran the company according to its three basic customer-oriented concepts of value, brands, and convenience. Through a long-established philosophy of being a family-focused, specialty discount department store, Kohl's offered customers a mix of national-brand and private-brand casual clothing and home furnishings at discount prices in stores that are convenient to drive to and have inside environments that are organized in an orderly and friendly manner.

Kohl's Corporation operated almost 600 stores in 37 states as of the beginning of 2004, with about half of these stores located in midwestern states. Kohl's competes with discount stores such as Wal-Mart, Target, and Kmart and with middle-level department stores such as Sears, Penney's, Mervyn's, and Macy's. During his time as CEO, Montgomery continued to grow Kohl's within the company's core midwestern region while steadily expanding into other U.S. markets—hoping eventually to mold Kohl's into a national chain.

RETAILING CAREER

Montgomery began his retail career in 1972 and over the next dozen years gained experience in a variety of jobs in the industry. From 1985 to 1987 he held executive management positions of increasing responsibility at Block's, a division of Allied Stores Corporation. He eventually became the CEO at Block's. In 1987-1988 he was employed in various executive management positions including senior vice president and director of stores, and general merchandise manager of Softlines at L. S. Ayres, a division of May Department Stores.

Montgomery joined Kohl's Corporation in 1988 as its senior vice president, director of stores. He was promoted to executive vice president of stores in February 1993 and joined the board of directors in 1994. He became vice chairman of Kohl's board of directors in 1996. In February 1999 he advanced to CEO after William Kellogg stepped down from the position (while retaining the position of chairman) in order to concentrate on Kohl's extensive expansion efforts. Montgomery assumed the chairmanship of the board in February 2003.

HOW MONTGOMERY MADE KOHL'S UNIQUE

Montgomery directed his management team to concentrate on middle-income customers who shop for their families and homes at Kohl's. Montgomery stocked the company's stores with (on average) about 80 percent national brands and about 20 percent Kohl's own private store brands. By maintaining strong merchandising relationships with top national brands of products, Montgomery was able to carry such easily recognized brands as Champion, Dockers, Haggar, Jockey, Lee, Levi's, Krups, Nike, OshKosh B'Gosh, Pfaltzgraff, Reebok, Vanity Fair, and others that are not typically available at discount stores. Montgomery felt that offering so many national brands—unlike Target, for example, which handled very little national-brand apparel—enabled customers to go to any Kohl's in the country and know exactly what products they will find there, thus saving them time and effort.

Montgomery also emphasized the best prices for its products. By controlling internal costs, Kohl's was able to sell its merchandise at prices that were generally lower than those found in department stores. As important a consideration as price was availability: Montgomery ensured that Kohl's products were in stock, historically with an in-stock position that averages about 90 percent, higher than the industry average.

Knowing that service and prices were not the only features considered by shoppers, Montgomery made sure that Kohl's stores were convenient and attractive to customers. He avoided placing stores in shopping malls, preferring instead locations that offered easy access in and out of the store. He emphasized the importance of keeping the stores clean inside and out, with well-lit parking lots.

RACETRACK DESIGN

Part of the design used by Montgomery in all Kohl's stores was a layout modeled after a racetrack. This simple design, as Montgomery explained, allowed shoppers to move past all of a store's merchandise in an easy and flowing manner. Montgomery hoped that such a design would continue to distinguish his stores from other retail stores, whose complicated layouts are often confusing to customers. Montgomery did not want people to feel as if they were walking around a warehouse with no idea where anything was located.

Working against the conventional retail philosophy that stores should keep people shopping as long as possible, Montgomery continued a basic concept of making sure that his customers could shop quickly while still spending more money. Montgomery believed that customers could spend less time in his stores but still buy more items when products were arranged in a simple and logical manner in an environment that was attractive to the eye.

OPENING-DAY FANFARE

Montgomery made sure that when the company entered new markets, it was done with much public fanfare. He planned grand openings in a grand way. For instance, at various points from 2001 through 2003, Kohl's opened 15 stores in Atlanta with one opening-day celebration and did the same with 13 stores in the Northeast (including Long Island, Connecticut, and New Jersey) and 12 stores in Houston. Montgomery prepared for these major events with "blitz teams," as they were called, of Kohl's employees from other stores who helped prepare the new stores for their openings.

In advance of such openings, Montgomery coordinated media advertising (such as television commercials, radio commercials during heavy drive times, and newspaper inserts, especially on Sundays) to announce the new store or stores. Generally, a series of a half-dozen commercials on various media outlets emphasized Kohl's ample and convenient parking, discount prices, wide assortment of brand names, and useful shopping/stroller carts (especially helpful for parents with children). Stores were first prepared with a "soft opening," which provided employees the chance to familiarize themselves with the Kohl's system before actual customers entered the store.

With regard to management aspects of supervision, logistics, and distribution, Montgomery believed that the more stores that were grouped together in a major market, the greater the efficiencies that resulted. In fact, many of Kohl's competitors used similar strategies for entering new markets, but according to industry analysts, Montgomery's management team at Kohl's always did a much better job in overall effectiveness when compared with these companies.

LEADING UP TO CHANGE

Over a 10-year period before Montgomery became leader of Kohl's, the company had increased sales at about 23 percent annually. This consistent success record was achieved by adhering to a strict strategy that gave Kohl's a reputation for being both a retail discounter and a department store. Management was able to persuade department store customers to shop at Kohl's by offering department store-like products at better prices. In addition, the management team was able to persuade discount store customers to shop at Kohl's because it provided the same variety of goods at a fraction of the square footage of other discounters because of its unique store design and centralized checkouts. At an average of 86,000 square feet, Kohl's stores were about half the size of most department stores. Shoppers liked the easy-to-walk-around stores.

During these 10 years, however, the competition saw what was happening with Kohl's successful policy and gradually copied it. In addition, during 2003 Kohl's expanded into California with the opening of 28 stores in the greater Los Angeles area, which distracted Montgomery and his management team from other stores due to the stiff competition—especially that of Mervyn's and Macy's—already located in the area. Montgomery soon saw complaints from Kohl's customers about a climate that was less organized and checkout lines that were regularly longer than normal. At the same time, Kohl's was adding numerous new lines to its stores, along with expanding many of its regular lines, forcing stores into a crowded environment. As a result, same-store sales declined 1.6 percent in 2003, a drastic departure from the 6 to 8 percent annual increase for most of the previous ten years. With less merchandise being sold, inventories increased, which forced mark-downs to be taken. As a result, net income in 2003 dropped 8.1 percent to $591.2 million from the previous year's $643.4 million. Montgomery realized that a new strategy had to be implemented.

REFOCUSING ON CORE STRENGTH

With Kohl's in the midst of major problems, Montgomery decided to refocus the company on its traditional core strength: providing easy and convenient shopping in its stores. Thus, Montgomery cut store inventories by an average of 17 percent and removed all but necessary styles and sizes for its products. By December 2003 (during fiscal year 2004) Montgomery added new brands such as a new fashion line by fashion model/television personality Daisy Fuentes; a new line (that expanded the brand) of Gloria Vanderbilt Home towels, sheets, comforters, and bath mats; Estée Lauder cosmetics; and Laura Ashley Lifestyles bathroom and bedding accessories.

With this new strategy in place, Montgomery predicted that 2004 earnings per share would grow 25 percent to $2.15, as compared with $1.72 in 2003. Relying on expansion that often involved buying bankrupt retailers or building new stores on old department store locations, Montgomery planned to have stores in every region and every major metropolitan market (and many smaller ones) by 2006.

The company opened 85 new stores in fiscal 2003 (for a total of 542 stores) and planned to open about 95 more in fiscal 2004 and another 95 in fiscal 2005. With sales productivity levels at near the top of the industry—Kohl's sells $258 per square foot compared with $190 at Federated or May Department Stores—Montgomery was pleased with the progress his company made in 2003. He felt that his management staff had done what most competitors had been unable to do—a great job at marketing their stores. In fact, Montgomery succeeded in making Kohl's a popular place for young people to shop (both with and without their parents)—an accomplishment not seen at such retailers as Kmart, Sears, and Wal-Mart. With net sales in 2003 crossing the $10 billion milestone, Kohl's was positioned for success well into the twenty-first century.

HELPFUL COMMUNITY CITIZEN

Montgomery worked hard to make Kohl's a dedicated citizen within its communities. Through its program Kohl's Cares for Kids(r), the company—to name just three activities—raised money for Children's Hospital (most recently with the help of Clifford the Big Red Dog, from the popular children's television show), recognized youngsters who volunteered (even commissioning a scientific study managed by Vanderbilt University to find ways by which adults could stimulate youth volunteerism), and offered gift cards as fundraisers for schools and youth groups. Kohl's also developed Kohl's Kids Who Care, which recognized humanitarian efforts among America's youth.

See also entry on Kohl's Corporation in International Directory of Company Histories.