Menomonee Falls-based
Kohl's Corp. continues to play the long game in its efforts to stabilize its bottom line, investing in its legacy brick-and-mortar store base as a key revenue driver and leaning on strategic partnerships with Sephora and, most recently, Babies "R" Us, to appeal to younger shoppers.
The retailer achieved earnings of $186 million ($1.67 per diluted share) in the fourth quarter of 2023, significantly up from a net loss of $273 million for the fourth quarter of 2022. Its full-year results followed a similar comeback trend and surpassed guidance with earnings of $317 million ($2.85 per diluted share), compared to a net loss of $19 million the previous year.
However, the fourth quarter, which includes the peak holiday season, saw net sales fall slightly to $5.71 billion from $5.78 billion a year ago. Net sales for the full year were down 3.4% at $16.6 billion.
Despite a
4.7% year-over-year decrease in comparable sales for fiscal 2023, Kohl's store footprint last year achieved its best comparable sales performance since 2010 -- a milestone the company points to as evidence that its current strategy "is working."
"Our fourth quarter performance capped off an important year for Kohl's," said CEO
Tom Kingsbury during the company's earnings conference call Tuesday. "As we've discussed throughout 2023, our company has undergone a significant amount of change across the business as part of our efforts to strategically reposition Kohl's for growth in 2024 and beyond."
Upon taking the helm last year, Kingsbury set in motion four strategic priorities in an effort to re-orient the company towards its long-term growth strategy: enhancing the customer experience, accelerating and simplifying value strategies, managing inventory and expenses, and strengthening the balance sheet.
When it comes to prioritizing customer experience, physical stores remain crucial and Kohl's strategic partnership with Sephora is evidence of that.
With beauty shop-in-shops now open at 910 Kohl's stores across the country (and growing), the "Sephora at Kohl's" line business generated $1.4 billion in sales last year, up more than 90% over fiscal 2022 and moving towards a previously announced goal of $2 billion in sales by 2025. In Q4, Sephora at Kohl’s drove a total beauty sales increase of more than 60%, with nearly 25% comparable beauty sales growth in the Sephora shops opened in 2021 and 2022.
Not only has Sephora boosted foot traffic atÂ
both large- and small-format Kohl's stores, but it has also helped the retailer get its foot in the door with a younger demographic of shoppers. That, in turn, has opened up a new avenue of opportunities for the value-oriented department store chain that has long struggled to broaden its reach into new customer segments. Â
Babies "R" Us partnership
A new partnership with New York City-based
WHP Global, parent company of Babies "R" Us, is one such opportunity.
This fall, Kohl's will add Babies "R" Us shops to approximately 200 of its store locations, with the first shops opening in August. The sectioned-off areas will range in size from 750 square feet to 2,500 square feet and will carry a variety of baby gear, including clothing, furniture, activities and products for feeding, bathing and safety. Kohl’s existing assortment of baby apparel will be displayed alongside, "creating a comprehensive baby shop for customers," according to a press release. The expanded assortment of baby products will also be available on Kohls.com.
“Evolving our assortment and bringing more relevant product to the millions of customers we serve is a core focus as we continue to deliver on Kohl’s broader growth strategy,” said Kingsbury in a statement. “We see significant opportunity in the baby gear category, and partnering with Babies “R” Us is another example of how we are finding new ways to optimize our assortment and further establish Kohl’s as the go-to brand for families.”
Founded in 1996, Babies "R" Us and its original parent company, Toys "R" Us, are among the now-nostalgic brick-and-mortar chains that fell victim to the rise of online shopping in the early 2000s and heightened competition from e-commerce giants like Amazon. WHP, which also owns Anne Klein, Express and Bonobos among others, acquired both brands in 2021, a few years after Toys "R" Us filed for bankruptcy. Today, the Babies “R” Us brand is available in more than 20 countries through e-commerce sites and more than 100 branded and independent stores, according to a new release.
In attaching itself to the Babies "R" Us brand, Kohl's expects to gain exposure to more new customers, "including younger customers who will be choosing Kohl’s for the first time," the company said.
Additional growth opportunities
Beyond baby gear, Kohl's has identified the home, impulse and gifting categories as untapped areas of potential in its campaign to bring younger shoppers into stores, and in its efforts to drive incremental sales growth.
"Collectively, we see these under-penetrated categories as a more than $2 billion sales opportunity over the next several years," said Kingsbury.
Kohl's has had a home department for years, but the company has spent the past year working to rebuild the category with an updated, expanded assortment of wall art, glassware and ceramics, botanicals, storage, lighting and seasonal decor. The next step is building awareness of the new collection with a marketing campaign launching later this month.
The gifting and impulse category is one that Kohl's had overlooked until Kingsbury took charge. One of the first moves he made was expanding the company's gift offerings and moving the assortment to the front of the store. During the 2023 holiday season, the move helped Kohl's sell through 90% of its gifting inventory. In addition, Kohl's last year expanded its assortment of impulse items and
merchandising at customer checkout line, driving more the 40% sales growth, said Kingsbury. Queuing lines are currently being added to 350 stores for a total of 435.Â
