Kohl’s Corp. posted lower second-quarter sales and earnings as core customers realign spending amid macro economic conditions. The retailer, meanwhile, announced it plans to expand its Sephora offering to all stores.
Kohl’s net income was $143 million, or 1.11 per diluted share, versus $382 million, or $2.48 per diluted share, in the 2021 quarter.
Kohl’s did better than Wall Street expected. Analysts polled by Yahoo Finance on average expected Kohl’s to deliver earnings per share of $1.03 and sales of $3.85 billion.
Second-quarter comparable sales decreased 7.7% and net revenue decreased 8.1% to $4.09 billion as net sales slipped 8.5% to $3.86 billion from the year-before period. Operating income was $266 million versus $570 million in the year-previous period, the company reported.
After a year of operating Sephora in select stores, Kohl’s announced plans to expand Sephora shops to all of Kohl’s 1,100 locations. Sephora shops already operate in 600 Kohl’s stores across the United States. Kohl’s stated Sephora at Kohl’s operations continue to perform well, making prestige beauty more accessible to more Americans than ever before.
The company pointed out the 200 Kohl’s stores with Sephora that opened in 2021 have maintained a high single-digit percentage sales lift relative to the balance of the chain. And in the almost 400 stores opened this year, Kohl’s indicated, it is enjoying a mid-single-digit percentage sales lift, consistent with the initial performance in the first 200 stores. The retailer added about half of all customers buying Sephora products at Kohl’s are attaching at least one other category to purchases. Kohl’s has projected its in-store Sephora operations will grow to generate $2 billion in annual sales by 2025 while boosting consumer engagement by drawing a new base of engaged beauty customers:
The partnership attracts new, younger and more diverse customers to Kohl’s stores, the company pointed out, with Sephora customers visiting more frequently than on average for the chain.
Later this year, plans call for Kohl’s and Sephora to significantly expand the holiday gifting assortment and increase marketing investment, providing the 600 stores with Sephora at Kohl’s and kohls.com with a big traffic driver during holidays, the retailer reported.
In a second-quarter conference call, Michelle Gass, Kohl’s CEO, said Sephora is the vehicle that will allow Kohl’s to satisfy its strategic goal of becoming a leading beauty destination. She said macroeconomic conditions were among the factors that resulted in weak second-quarter results. Kohl’s customers increasingly turned to the company’s private label products in the period, she said, adding Kohl’s will become more promotional going forward in what it expects to be an increasingly promotional retail environment. Home product sales declined in the quarter, Gass said, as they normalized after elevated activity in the throes of the COVID-19 pandemic.
In announcing financial results, Gass said, “Second-quarter results were impacted by a weakening macro environment, high inflation and dampened consumer spending, which especially pressured our middle-income customers. We have adjusted our plans, implementing actions to reduce inventory and lower expenses to account for a softer demand outlook. Kohl’s has navigated difficult periods in the past, and I am confident in our ability to successfully manage through the current uncertainty. I want to thank our incredible associates around the country for their commitment to Kohl’s and for providing excellent service to our customers every day. We continue to execute on our transformation strategy and are pleased to deliver outsized performance in the nearly 600 stores which have been refreshed and elevated, featuring Sephora as a key cornerstone. While 2022 has turned out to be more challenging than initially expected, Kohl’s remains a financially strong company with significant long-term growth potential.”
