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Call Kurtis Investigates: Is Kohl's Marking Up Before Markdowns?

Frequent sales and huge discounts -- it's a strategy that's kept many Kohl's shoppers coming back time and again.

Since the late 90s, Kohl's has exploded to more than 1,000 stores and driving more than $18 billion in revenue last year according to published reports.

Customers certainly seem to be getting into the Kohl's craze -- but are Kohl's sale prices always as good as they seem?

A CBS13 hidden-camera investigation conducted between November 2011 and January 2012 found items marked up as much as $100 from earlier prices and then put on sale.

What does it really cost?

Pattie Woody came home thinking she got 50 percent off a $209.99 sheet set from Kohl's.

But inside the packaging, she found another price tag -- this one listed at $169.99 -- $40 cheaper than the outside sticker.

"It really surprised me," she said.

She still believed she had gotten a good deal -- but, peeling back three layers of price stickers -- she found her sheet set had been marked up three times, she said.

"You always expect to see the price tag stuck on top of another one is the cheaper price," said Woody. "Actually, it was more expensive."

She suspected Kohl's may be marking up prices before marking them down, she said, making sales seem bigger.

The Investigation

CBS13 hidden cameras went inside several Kohl's stores, checking the printed price tags of some items currently on sale.

A CBS producer found clothes, luggage, kitchen, bath and bedding products -- 15 items in all -- marked up, some as much as $100, and price tags on top of price tags.

Other items have different price tags on different areas of the product.

One twin sheet set was listed at 50 percent off the original price of $89.99. But inside the plastic zipper, the earlier price tag shows $49.99, indicating the current sale is only $5 savings from the original tag.

A 10" skillet was listed on sale for $34.99, with a regular price of $39.99, but underneath that sticker, the earlier price tag was marked $29.99 -- meaning Kohl's current price on sale is $5 more than the originally marked price.

CBS13 was not able to learn exactly when the prices were raised.

The Practice of Marking Up Prices

Consumer attorney Stuart Talley thinks if Kohl's is marking up prices to mark them down, the company is breaking California State law ... which bans companies from "making false or misleading statements" about the "amounts of price reductions."

"That's illegal in California," he said. "You just can't do it."

A CBS13 producer wanted to see what would happen if customers challenge the price at the counter, with a sheet set marked 30 percent off the sticker price of $149.99

The sheets rang up $104.99, as displayed in store, but that sale price is $15 higher than the sticker inside the packaging showing these sheets were once marked $89.99.

"This thing actually says $89," the producer said to the clerk. "Can I get 30% off that?"

The clerk calls over a manager, who agrees to give the 30 percent discount off the $89.99 label.

"Why would it go up that much?" the producer asks the manager.

"Sometimes when we do scratch-off coupons, we mark stuff up," the manager said.

"Oh, really?" the producer said. "You mark stuff up if it's a scratch-off, something like that?"

"Something like that," the manager replied.

When CBS13 reached out to Kohl's, the company denied any wrongdoing, saying, "Kohl's does not raise "off-sale" prices on a short-term basis just for purposes of a future sales event."

"As is common in the retail industry, from time to time, product prices are increased due to production and raw material cost increases," the statement said. "When these types of price increases are implemented, our stores are instructed to re-ticket all items currently in our inventory to match the prices on the tags for all in-coming merchandise."

Read Kohl's full statements to CBS13 (PDF).

Kohl's claimed the price of Woody's sheets went up because of the rising cost of cotton, and admitted the prices on the 15 items a CBS producer found marked up were raised in the late summer or early fall -- well before the current sale.

The Business

"No excuses, flat out no excuses," said Harry Friedman, president of The Friedman Group, the world's largest retail consultant firm.

Friedman consults retailers around the world on how to maximize profits while maintaining strong customer service.

He didn't buy Kohl's explanation for the markups ahead of sales and said the company is playing a game to make up for shrinking profits in this economy.

"I don't know that it's malicious. ... They're just trying to stay in business," he said. "But it's a bad practice."

"Fifty percent off looks really great," said Woody.

But Woody, and other customers, weren't quite sure they could believe a Kohl's sale when they see one.

"Now I'm going to check everything," one woman said.

CBS13 contacted the National Retail Federation, which said pricing and sale strategies can vary a great deal, depending on the company.

"Promotion strategies, pricing strategies are all very proprietary," said the NRF's Kathy Grannis. "When it comes to pricing strategies, it really does come down to the retailer."

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