Kohl’s holiday look offers a glimpse into the turnaround plan
At Kohl’s stores, chief retailer Nick Jones said shoppers will see a mix of upscale items and sharp prices. For example, the company has signs highlighting the low prices of some sweaters, but has also incorporated European-made glassware into its interior design.
Melissa Repko | CNBC
How buyers travel Kohl’s In stores this holiday season, you’ll see gift ideas, holiday decorations and a possible glimpse into the retailer’s future.
It marks the first peak shopping season under the supervision of Kohl’s new CEO, Tom Kingsbury. The retail veteran who previously ran the off-price chain Burlington Stores, officially stepped into the role earlier this year after previously serving on an interim basis. He succeeded Michelle Gass, who left the company to become CEO-elect Levi Strauss.
Kohl’s launched the latest effort to refresh its brand as the company finds itself in a confusing economic environment and after coming under scrutiny from activist investors and failing to strike a deal to sell to Franchise Group, owner of The Vitamin Shop to complete. Sales and share prices lagged behind.
In trying to turn things around, Kohl’s has focused on improving the appearance of its stores and the brands and merchandise it carries, Kingsbury said. He said that by focusing on popular brands and categories, the company could return to sales growth in 2024.
“Home decor, pets, gifts, stimulus, all the things we’ve talked about are really going to help us get there,” he told investors in an earnings call in August.
Net sales for Kohl’s last full fiscal year, which ended in January, totaled $17.2 billion — a nearly 9% decline from the fiscal year that ended in early 2020, just before the Covid pandemic upended spending patterns .
The company’s shares have fallen about 17% this year, underperforming the S&P 500’s 12% gains and the roughly flat performance of the retail ETF XRT.
Kohl’s has forecast full-year sales to decline 2% to 4%, including the roughly 1% impact of a week-shorter fiscal year.
Along with its own strategy shift, Kohl’s is preparing for a season in which consumers are sending conflicting messages about how much they’re willing to spend and what they think is worth buying, even as some are tightening their belts.
In fact, during a store tour in Ramsey, New Jersey this week, some current items like holiday decorations and fall sweaters were 40% or 50% off, an indicator that the retailer is trying to shift merchandise and appeal to more price-conscious shoppers.
“We know they’re overwhelmed,” said Chief Marketing Officer Christie Raymond. She said the company is monitoring factors such as rising credit card debt, dwindling savings and the return of student loan payments suspended due to the pandemic.
But she added that shoppers are still spending money — sometimes starting early to search for the best deals or perfect items that seem worth their money.
Kohl’s brought its holiday items to stores the first week of October, weeks earlier than the pre-pandemic holiday season in 2019 and even earlier than in recent years when Covid upended the typical shopping rhythm, Raymond said.
Here are the key strategies Kohl’s is pursuing this holiday season and beyond:
Beauty is one of the rare discretionary categories where shoppers are spending despite inflation. Kohl’s has helped by opening more Sephora stores within its branches.
Melissa Repko | CNBC
Bet on beauty
From perfume to mascara, beauty is one of the rare categories where shoppers continue to spend — even as they contend with more expensive groceries, higher interest rates and higher utility bills.
Kohl’s has joined this trend and expanded its stores to include additional Sephora stores. There will be around 900 stores this holiday season – meaning they are now in the vast majority of the more than 1,100 stores across the country. There are also some exclusive items offered, such as gift sets that are only available at Kohl’s.
It will be a larger part of this holiday season. A year ago, about half of all Kohl’s stores had a Sephora shop. Two holidays ago, when the beauty salons were held for the first time, there were 200 locations.
Sephora at Kohl’s has been one of the company’s bright spots, especially at a time when customers are increasingly wary of consumer products. The company’s total cosmetics sales rose nearly 90% year-over-year as of July 29, the end of its most recent fiscal quarter.
Raymond said Sephora has attracted younger, more diverse shoppers to stores but is also popular with Kohl’s longtime customers.
Kohl’s plans to open smaller versions of the stores in its remaining stores over the next few years. And it is looking for ways to get its newfound customers to browse and purchase merchandise in other areas of the store, said Nick Jones, the company’s new chief merchandising and digital officer. He joined Kohl’s earlier this year after working for British retailers including Marks & Spencer and ASDA/Walmart UK.
Kohl’s has expanded the areas where shoppers can snag last-minute items.
Melissa Repko | CNBC
Tendency to make impulse purchases
As shoppers rush around during peak shopping season, Kohl’s wants to entice them to buy one more — or ideally two or three — more things.
Kohl’s has created more space in the checkout area for impulse items and gift items such as candy, small toys and stuffed animals. There is also a dedicated exhibition of Sephora beauty items to take home, such as face masks and lipsticks.
Additionally, gift ideas are scattered throughout the stores, such as aisles where customers can discover a Barbie dream house for their child or a high-tech toaster for their sister-in-law.
Jones said Kohl’s wants to simplify the season for busy families. That doesn’t just mean Not only do they have a wide selection of merchandise, but they also point out good deals, with signs announcing discounts and displays that include creative gift ideas like a colorful sweater, children’s books, or a collection of hot sauces.
Additionally, space was created at the front of stores by removing some checkouts so customers can see trend-focused or seasonal items as they enter.
Kohl’s sells cookware and throw pillows, but also offers other home accessories such as wall art and vases.
Melissa Repko | CNBC
A loot for home
Home goods may have been a hot pandemic category, but Kohl’s believes it’s now a big business opportunity.
During the holiday season, shoppers may notice an expanded selection of items that could brighten up their home, help them host friends, or look for something to put under the tree. For example, stores are stocking more glassware and party hosting items like copper cups, champagne flutes and cocktail shakers.
Kohl’s has already sold bedding, small appliances, picture frames and more. But at the company’s earnings call in August, Kingsbury talked about home goods as one of the company’s biggest growth areas. It’s about collaborating with new vendors and adding lighting, wall art and more.
As some Americans decide against moving due to high interest rates, they may want to purchase decorations to freshen up their current home, Jones said.
In Kohl’s stores, the area dedicated to pet products is becoming increasingly larger. The retailer stocks dog and cat toys, as well as items like shampoo and treats.
Melissa Repko | CNBC
And something for Fido too
Add Kohl’s to the list of retailers trying to capitalize on the pandemic pet boom.
The retailer is devoting more space to dog beds, cat towers and some pet items that are replenished more frequently, such as treats and shampoo.
Kohl’s decided to expand across the chain after a successful test in 50 stores last fall, Kingsbury said in its earnings call in August. The company wouldn’t quantify the number of stores with more pet items, but Jones said the Ramsey store, reflecting its holiday look, has twice as many items in that category as it did a year ago.
Other retailers have also focused on this category, which has historically proven more resilient during recessions and economic downturns. Lowes made a deal with Petco Health & Wellness wants to open mini-shops in more and more stores and Walmart recently announced the opening of its first animal health center with veterinary care.
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