Kohl’s stays committed to physical store expansion, active and exclusive brands drive footfall
Sales down, just, but profits up strongly…and no plans to shutter stores. That was the news from Kohl’s on Thursday. It’s a department store group busy trying to attract more shoppers by introducing news brands, (including Under Armour, a successful partnership, it noted), and cutting some staid in-house lines.
Profit jumped 49% to $208m/$1.25 a share, boosted by prudent cost cuts and free of the $128m charge a year ago for store closures. Analysts had expected EPS of $1.19.
Revenues, meanwhile, fell just under 1% to $4.14bn, meeting analysts’ forecast, and comps fell 0.4% during the quarter, although CEO Kevin Mansell said footfall increased during the quarter.
Along with a 19% increase in online sales, 31% of digital sales were fulfilled in stores, with both ship-from-store and buy-online-pickup-in-store contributing to the increase, it said.
But headline news had to be that Kohl’s had no plans to announce mass store closures this year, according to Mansell on an earnings call.
“There is an impact on a market when you have fewer stores,” he said, noting that e-commerce sales tend to slow in areas where stores have closed. “Everything we’ve learned reinforces the importance of a great physical footprint.”
Kohl’s is also opening smaller stores measuring around 35,000 sq ft, including four new locations this October in “dense trade areas”, and is working to adapt stores to local community tastes, using data that identifies what consumers in those areas want.
“The objective there is to more clearly determine what our stores will look like and how they will operate in the future,” he said. “We call this initiative Your Store, extending the concept of personalisation to the level of an individual store.”
Kohl’s also noted improving traffic in July. It said average transaction value increased in the quarter and highlighted the success of its Under Armour partnership. Exclusive brands were also a sales driver with Simply Vera Wang and Lauren Conrad, the former reality TV star turned fashion and lifestyle guru, also reporting double-digit sales increases for the quarter.
But it flagged up its activewear business for attention, producing a mid-teen double-digit increase over last year across both footwear and apparel, driven by addition of Under Armour but also sales increases in Nike and adidas. It also expects to continue to gain market share in activewear apparel and footwear in H2, it also noted.
Also added to its roster of new-to-store brands include Clarks footwear for the Back-to-School shopping season and is looking for other brands to add. The chain has said it will still offer the best sellers of its private-label brands, such as Sonoma, Croft & Barrow and Apt. 9, but others may be discontinued or reduced.
“Gross margin and SG&A expenses were consistent with our expectations and we are seeing benefits from our ongoing inventory initiatives and the early stages of our cost-saving initiative,” Mansell added.