Kohl’s Corp. reports $14M first quarter profit
After multiple poor quarterly performances, Kohl’s Corp. is starting to see some light as the company reported Wednesday a $14 million first quarter profit.
The Menomonee Falls retailer also said sales decreased 3.3% in the most recent quarter.
“The first quarter was the first step in the right direction,” recently appointed CEO Tom Kingsbury told analysts after the report was issued Wednesday.
In 2022 the company ended the year with sales down 7%, and the company lost a total of $19 million from the end of January 2022 to the end of January this year.
“Our objective is to show moderate improvement as we move through 2023 and we set ourselves up to accomplish this with our first quarter performance,” Kingsbury said. “We have a significant opportunity to improve Kohl’s business over the long-term. More specifically, we share the priorities and actions we had underway to drive sales and earnings performance.”
Kingsbury has been mostly silent since entering his role in December after former CEO Michelle Gass left the company.
Inventory is a priority
When he took over, Kingsbury made a point to focus on inventory and has said the company bought too much in 2022 and it needed “to improve those disciplines.”
According to the first quarter earnings report, Kohl’s inventory was down 6% to $3.5 billion compared to the same time last year.
“We feel good about our Q2 inventory levels and are well positioned from a liquidity perspective with plenty of room to chase,” Kingsbury said. “This is a positive given the persistent macroeconomic headwinds.”
Continued investment in Sephora
In recent years the partnership between Kohl’s and beauty supply Sephora has been growing and producing positive results for both companies.
“Sephora at Kohl’s continue to outperform our expectations driving our total beauty sales increase of 150% year over year,” Kingsbury said adding the partnership is “a great example of how we’re enhancing the customer experience.”
The 200 Sephora at Kohl’s stores that opened in 2021, saw “mid teens” comparable sales growth during the quarter and the sales in the 400 other Sephora at Kohl’s shops that opened in 2022 “continue to exceed our plan,” Kingsbury said.
“The partnership is delivering on what we set out to achieve over the longterm, that is capitalizing on a significant growth opportunity in the beauty industry by leveraging each company’s strengths to grow our collective customer basis,” Kingsbury said. “We continue to gain market share.”
Kingsbury said Sephora at Kohl’s is bringing in new customers who are shopping at “twice the frequency of our average customers.”
The company plans to have more than 900 Sephora locations open at stores by the end of the year.
Changes to physical store
Product location matters especially in the layout of Kohl’s stores.
“Increasing productivity is vital to our future success,” Kingsbury said of the Kohl’s stores.
As part of strategy to increase shopping at stores, Kohl’s plans to put gift items near the front of the store, expand its pets section and add self-checkout kiosks to 250 stores.
The company also plans to increase its home category and move products near the front with gifts.
“While we were disappointed with our Q1 performance, home did enter the year with leaner inventories and therefor had less benefit from our clearance activity,” Kingsbury said. “However we are highly focused on improving results by rebuilding our core business as well as growing underrepresented categories such as gifting, decor, impulse and outdoor.”
Digital sales down
Kohl’s reported digital sales were down nearly 20% for the quarter, bucking recent trends of more people shopping online.
“Our customers continued shift back to stores and we reduced ‘online only’ promotions as we work to simplify our value strategies,” Kingsbury said.
Kohl’s’ digital penetration was 26% for the quarter, down from last year but up from pre-pandemic levels, Kingsbury said.
The company plans on refreshing its digital experiences including enhancing the virtual experience, curating product assortment, and refining Kohl’s marketplace and media network.
Kohl’s shares closed up about 7.5% at $20.72 in very heavy trading.