Tom Kingsbury, in his first earnings conference call as Kohl’s new CEO, said he wanted to make sure analysts understand that the task facing him is “not a total overhaul.”
Kohl’s, Kingsbury said, has a solid foundation and a number of promising initiatives in place that will help it drive growth, execute more efficiently, and gain market share.
“The reason why I came back to Kohl’s is because I see these opportunities, and I see that we can take advantage of these opportunities in the future,” Kingsbury said in the call.
But investors also see a lot of problems, and they reacted to today’s earnings news by driving Kohl’s stock down by more than 3% after the call.
Kohl’s reported that net sales fell 7.2% during the fourth quarter, with comp store sales down 6.6%. The retailer reported a loss of $273 million, or $2.49 per share for the quarter, instead of the profit of 98 cents a share expected by analysts.
Kingsbury was named interim CEO in November after CEO Michelle Gass left to become President at Levi Strauss & Co
One of the biggest opportunities Kingsbury sees for Kohl’s is the potential to use its Sephora partnership to attract more young female shoppers to Kohl’s.
Kohl’s, Kingsbury said, is adding products to catch the eye of the younger shoppers coming in to buy Sephora products. “We want to make sure that they can also buy women’s apparel, women’s accessories, women’s footwear” and other merchandise, he said.
The partnership with Sephora, which brought Sephora stores-within-a-store into Kohl’s stores, has been one of Kohl’s biggest successes in recent years. The 200 Sephora shops that opened in 2021 had high-single-digit comp growth in the quarter, and the 400 shops that opened in 2022 showed better than expected results, Kingsbury said.
The retailer plans to open another 250 Sephora shops this summer, bringing the total for its standard 2,500 square-foot Sephora shops to 850. It also plans to open 50 smaller format Sephora shops, and expand the Sephora presence to all Kohl’s stores by 2025.
Last year, eight million Kohl’s customers bought Sephora products in Kohl’s stores, and total beauty sales increased 90% in the 4th quarter, Kingsbury said.
In the earnings call Kingsbury outlined proactive steps Kohl’s has taken to reduce inventory, and to realign management to enable the company to operate more efficiently, and to execute more effectively. He noted that he recently hired David Alves as President and COO, and Nick Jones as Chief Merchandising and Digital Officer.
Kingsbury said he has visited a number of Kohl’s stores in recent months, and that he is convinced that Kohl’s continues to fill “an important need in the market offering highly relevant products at a great value to millions of customers in conveniently located stores across the U.S. and online.”
To succeed Kingsbury and his new executives, however, will have to give shoppers more reasons to enter a Kohl’s store other than to look for the Sephora shop.
Kohl’s Corporation, a retail chain based in the United States, recently announced its new Chief Executive Officer, Michelle Gass. Gass, who comes from the food and beverage industry with a strong background in marketing experience, believes that Kohl’s does not need a “total overhaul.” She intends to focus her efforts on bolstering marketing efforts and addressing the company’s loyalty program.
However, despite Gass’s optimism, many investors are skeptical that mild changes will be enough to boost Kohl’s profitability. While the company has encountered financial difficulties in the past, the last few years have seen a marked improvement, due in part to the success of Gass’s predecessor, Kevin Mansell.
According to Gass, she “sees tremendous opportunity to further leverage our digital capabilities, to drive traffic and loyalty, without diverting resources from our strong store portfolio and need-based/impulse purchases.” She also stated that she plans “to focus on … creating an environment of trust and accountability combined with a sense of urgency.”
This approach may not be enough to convince investors, however. Many analysts and investors believe that Kohl’s needs more drastic changes to become a more competitive player in the retail industry. Specifically, they are calling for more aggressive investments in digital capabilities, store renovations, and an emphasis on e-commerce.
Gass is firm in her belief that Kohl’s does not require a “total overhaul” in order to be successful. While her optimism is admirable, investors would likely prefer to see more dramatic changes in order to stay competitive in the ever-evolving retail landscape. Only time will tell if Gass’s plan will be enough to please both the company’s shareholders and its customers.