Kohl’s reported second quarter sales and earnings. Sales decreased 4.8% to 3.7 billion. Net income in the quarter was $58 million or $0.52 per diluted share compared to 2022 net income of $143 million or $1.11 per diluted share.
There was a lot of optimism during the investors call after the earnings were announced. Sephora completed its opening in 850 locations and the beauty and fragrance company yielded a 20% increase in sales. It meant that the 600 stores open before this year and the 250 units now open were attracting a lot of new, young customers to Kohl’s. The units are all 2,500 square feet in size, and while they were implanted in stores obviously caused a dislocation of Kohl’s merchandise. The dust has settled and Sephora is attracting new customers that are shopping for more than the Sephora merchandise.
Based on the Sephora success Kohl’s has tested with 5 stores a concept of 750 square feet concept. It is so successful that 45 additional stores will have the Sephora beauty and fragrances in smaller, 750 square foot Kohl locations.
Tom Kingsbury, CEO, spoke about his plans for the future which includes his emphasis on value, impulse merchandise, gifts and especially home décor, pets and home furnishing. His early tests have shown great promise for additional sales.
The company will open 7 additional stores this year. One is a relocation and two opened in the first quarter. An acceleration of store opening is forecast; however, the stores will be smaller – Kingsbury mentioned 55,000 and 35,000 square foot units. It will be easier to find good, productive locations for those store sizes.
The company reaffirmed their projection of sales increase of 2% to 4% and earnings per diluted shares of $2.10 to $2.70. (The year includes a 53rd week.) Last year the company reported a net loss of ($0.15) for the full year.
POSTSCRIPT: Tom Kingsbury has the operation in firm control and I see profitable growth in the coming years. Certainly, Sephora has given Kohl’s stability and the ability to grow further in the coming years. The turn-around takes several years, but the underlying direction is exciting and will be rewarding.
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