Mansell to retire as Kohl's CEO; former Starbucks executive Gass to succeed him

Michelle Gass, who came to Kohl's Corp. four years ago after a successful run at Starbucks, will succeed Kevin Mansell as Kohl's CEO.

The change promises new perspectives at the Menomonee Falls-based retailer, which like other department store chains has struggled to find a path to growth as online competition eats into sales and consumer preferences evolve.

Amid the changes, Kohl's remains committed to brick-and-mortar but is reconfiguring its fleet of some 1,150 stores to effectively downsize their retail footprint. And the firm recently raised industry eyebrows by unveiling an alliance with arch-rival Amazon.

The ascension of the 49-year-old Gass — her name rhymes with "boss" — also will make Kohl's a rarity. While most department store customers are women, relatively few women occupy the top spot at large U.S. retail companies. The latest list of Fortune 500 firms shows just four retailers with female CEOs, and only one of those companies, Ross Stores, sells clothing — the heart of the department store business.

Gass will take over from Mansell, 65, when he retires next May. Currently Kohl's chief merchandising and customer officer, Gass has been viewed as a potential successor since she came to the firm in 2013.

She had been a top lieutenant to then-Starbucks chief executive Howard Schultz, winning credit for helping revive the premium-coffee chain — and for turning its "Frappuccino" drinks into a major revenue generator.

At Kohl's, Gass has done well as chief merchant, bringing in brands such as Under Armour, improving the look of the stores and spearheading a strong customer-loyalty program, said Brian Yarbrough, a retail analyst with Edward Jones.

"They seem to be heading in the right direction," he said. "The issue is right now it’s a structurally challenged business. People just aren’t buying apparel and footwear and these items like they used to. They’re spending on leisure, they’re spending on technology … they’re spending on health care.”

With Gass' promotion, Chief Operating Officer Sona Chawla — a former Walgreens executive who also was in the running for CEO — will become president.

Both women had long been identified as candidates for the top job in what Yarbrough said has been a notably smooth and orderly succession. 

Robert W. Baird & Co. analyst Mark Altschwager said in a research note Tuesday that Mansell will leave Kohl's "in solid financial position and with a talented, energized team in place — each a testament to his strong leadership."

Having not just the CEO but the two highest executive posts filled by women, meanwhile, will make Kohl's even more unusual — assuming Chawla remains. 

"Now, the issue will be, if they both were really candidates, and now Sona didn’t get it, if she decides she’s going to go somewhere else because she wants to be CEO," Yarbrough said. "That’s where you run into issues when you have two candidates.”

Neither he nor Altschwager envision major changes in Kohl's strategy in the short term. The company has committed to keeping a strong brick-and-mortar presence — albeit with smaller stores — while continuing to nurture its digital business.

But the recent deal with Amazon has prompted Altschwager and others to speculate that the online giant, which sees apparel retailing as a major opportunity, might follow up its acquisition of Whole Foods with a purchase of Kohl's.

So far, the Amazon alliance appears to be a test by Kohl's, which typically makes major moves only after studied deliberation. The company will sell Amazon "smart home" products in 10 stores in Chicago and Los Angeles and accept Amazon returns in 72.

But in a research note this month that Altschwager acknowledged was "pure speculation," he said several characteristics of Kohl's neatly fit Amazon's needs, including convenient, non-mall locations for 93% of Kohl's stores, and excess square footage that could be repurposed for distribution.

"Beyond the obvious traffic-driving potential" of letting Amazon customers return unwanted purchases at Kohl's, "why else let the fox in the henhouse?" Altschwager asked in his note.

Mansell said in a statement that it had been a privilege to spend 35 years at Kohl’s, including 19 years on the board and nearly 10 as CEO. In an interview Tuesday, though, he declined to talk about his accomplishments or areas where thinks he may have fallen short.

"This is about Michelle and Sona," he said. "I’m a side note.”

Mansell joined Kohl's in 1982, when the company was a Milwaukee-area retailer with just a dozen stores. His long tenure spans both the huge growth of Kohl's in the 1990s and early 2000s — when the firm consistently outperformed its peers and its stock price soared — and the firm's more-recent woes. Like other department store chains, Kohl's has seen sales stall in the new retail environment. The company's stock price, meanwhile, has essentially stagnated.

Mansell, who came up through Kohl's merchandising ranks, became president in 1999 and CEO in August 2008. He also has been chairman of the company's board of directors since September 2009.

Over the first 10 years after Kohl's went public in 1992, the firm's share price increased roughly 40-fold. Since the end of the recession, however, it has largely moved sideways.

Three years ago, amid similarly lackluster sales, Mansell announced an initiative dubbed the "Greatness Agenda" that, among other things, sought to lift sales from about $19 billion to $21 billion in 2017. The firm won't come close to hitting that goal. Instead, sales have inched downward. Net income fell from $867 million in 2014 to $556 million last year (or $673 million after excluding one-time expenses).

Still, Kohl's retains a strong financial position that has allowed it to make needed investments and keep up with rapid, technology-driven change, Mansell said.

"I think the future's really bright," he said.

In a statement, Gass called Kohl's "resilient, innovative and agile," with a strong presence in both store and digital retailing, powerful brands and a "differentiated" value proposition.

"I am energized by the challenges we are all facing today in the retail sector," she said.

Gass, who holds a degree in chemical engineering, as well as a master's degree in business administration, spent nearly 17 years at Starbucks in a variety of leadership roles in marketing, merchandising and strategy. She joined Kohl's as chief customer officer, overseeing marketing and the retailer's growing e-commerce business. In 2015, she became chief merchandising officer as well.

Chawla, 50, was president of digital and chief marketing officer at Walgreens before taking the chief operating officer post at Kohl's in November 2015. 

When Mansell retires at the company's annual meeting on May 16, the Kohl's board plans to appoint one of its current independent directors as chairman. Gass will be nominated then to fill the board vacancy left by Mansell's retirement.