Kohl's arrival is wake-up call for competitors. (Up Front).

To ensure the success of its 28-store expansion into Los Angeles, Kohl's Department Stores did what any aggressive business would -- it raided the competition.

Kohl's Corp. has spent the past two years planning its foray into Southern California, which was officially launched last week -- and much of its success will depend on Dave Eske, Kohl's vice president and regional manager, who spent 15 years directing operations at Target Corp. throughout California.

Eske smiled broadly when asked what Kohl's could possibly have offered him as a lure away from Target.

"All they did was show me what they had to offer in California," he said last week while touring a new Kohl's in Torrance.

It's not every day that a national retail chain swoops into Southern California and opens 28 stores simultaneously, as Kohl's did on March 3. Still, Menomonee Falls, Wis.-based Kohl's is no ordinary department store.

At a time when many chains are struggling to find customers or falling into Chapter 11 bankruptcy protection (Kmart Corp.), Kohl's has found success by carving a narrow niche. The company sells brand names at low prices and its stores are easy to navigate.

For old-time retailers like J.C Penney Co. and Sears Roebuck & Co., the competition will be fierce. Already, Robinsons-May and Macy's are rising to the challenge with a slew of discounts and promotions that are aimed, in part, at waking sluggish consumers.

"No retailing force has yet to emerge as a competitive threat to Kohl's," said Daniel Barry, first vice president at Merrill Lynch & Co.

Warehouse

Even so, with expansion comes risk.

Donald Trott, an analyst at Jefferies & Co., cut his earnings forecast on Kohl's this year because of the heavily promotional retail environment.

Moreover, Kohl's is expanding fast - perhaps too fast. The company opened 75 stores last year, and plans to open another 80 this year, a growth rate that could get derailed in the fragile economy.

Last week, Kohl's reported that fourth quarter net income rose 19 percent, to $279 million, from the like period a year ago as sales surged 17 percent, to $3.18 billion. But same-store sales - which discount sales growth from newly opened stores - were disappointing in December, rising just 3.3 percent from a year earlier. The stock has fallen to $44 a share recently from a high of $78 in May 2002.

Though Kohl's has opened a large number of stores at the same time in New York, Houston, Boston, Dallas and Atlanta, the opening of 28 stores and the hiring of 4,200 workers in Los Angeles is the largest expansion to date. Its strategy here, as elsewhere, is to hold down costs while at the same time becoming an instant force in the market.

The move into L.A. began with the construction of a massive distribution center near Ontario International Airport in 2001. The facility can feed products to 100 stores, thereby leveraging operational and marketing costs, said Julie Gardner, Kohl's senior vice president of marketing.

"We have done this in so many different markets that we're very well organized at opening a large number of stores in a single day," Gardner said.

Because Kohl's offers a narrow assortment of clothes and household items, it drives a hard bargain through contracts with vendors. That, in turn, generates higher sales-per-square foot than any retailer, with sole exception of Bed, Bath & Beyond Inc. stores.

Harder for Kohl's has been securing locations at favorable prices, as it has in other markets. The launch, timed in an iffy retail climate, could also pose problems.

The company shuns expensive malls, opting instead for stand-alone locations or strip centers. Because of its choices of locations, parking is very tight at many of its locations and that could discourage customers from shopping.

Another task is recruiting - starting at the top.

Larry Montgomery, Kohl's chief executive, said at an analyst conference last year that hiring top executives was perhaps the single biggest risk the company faces. "There are lots of things that have to be in place strategically for you to keep on bringing talent through the company that can go out there and parlay that Kohl's equation in all those different regions," he said.

The concern is felt at all levels. Mark Wehman, a store manager in Torrance who was one of the earliest L.A. hires, spent several weeks last year at a store in Wisconsin to learn the ropes. "The company wasn't about to ship a bunch of people out from the Midwest to run these stares," Wehman said. "So we went out there to learn."

With store managers in place, Kohl's began aggressively recruiting workers through classified ads, job fairs, radio and the Internet, It ran into trouble finding enough workers in Orange County, so the company created an ad that was shown at a handful of movie theaters to attract new employees.

"We found that many people looking for jobs are already employed and they many not be reading the classifieds," Garner said. "So we thought of movie ads."

Kohl's keeps its expenses low by limiting the number of salaried managers and hourly employees. Each store has a manager and three assistants, and roughly 25 to 30 full time employees. The rest - 80 to 100 workers - are part-time.

The company touts the fact that it has a "Friends and Family" program in which current employees can bring in family members or friends to work part-time during rush hours on weekends.

The stores are designed to save labor costs with self-selection merchandise displays, clear signage and central checkout counters in the front of the store.

Like most retailers and so many other corporations, Kohl's has a charity program to "give back" to the community by donations to Los Angeles and Orange County Children's hospitals. "Kohl's wants to be seen not as a major conglomerate coming to town but as a member of the community," said Eske.