Kohl's sales were down 7% and the company reported a $273 million quarterly loss. Five takeaways from what executives said about the future.
While Kohl’s Corp. may have hoped for a strong holiday season in 2022, according to the company’s fourth quarter results, that gift never came.
New CEO Tom Kingsbury told analysts that the Menomonee Falls-based retailer is a “solid company,” and said 2023 will be a “transitional year.”
Kingsbury said the company implemented several “growth initiatives” in the fourth quarter “that will begin to benefit our results in 2023 and structure the organization to run more efficiently.”
Kingsbury took over as CEO in February.
“It is clear to me that Kohl’s fills an important need in the market, offering highly relevant products and a great value to millions of customers in a convenient located stores across the U.S. and online,” Kingsbury said. “We’ve made great strides in beauty through our Sephora partnership. However, we have lost some ground in other key categories.”
Here are some key numbers including in the recent financial report:
Sales down 7%, company lost $273 million in last quarter
After struggling for most of 2022, Kohl’s said sales were down more than 7% for the final quarter of last year, and down roughly 7% for the entire year compared to 2021.
The company lost $19 million in 2022 compared to the previous year.
Kohl's said it lost $273 million in the last quarter, ending Jan. 31.
But the company is hoping the strategies its implementing now will pay off later this year.
During the first part of this year, Kohl's sales are higher than annual guidance because of “elevated clearance activity” but the company expects that trend to moderate, said Jill Timm, chief financial officer.
“We expect both our sales and earnings to build through the year,” Timm said.
90% sales increase in beauty
It was a small moment on the call with analysts, but Kingsbury said
The company increased sales on its beauty products by 90% in the last quarter of 2022, Kingsbury said.
Kohl’s has bet big on its partnership with Sephora and spent a lot in the past two years adding Sephora to its stores and the investment seems to be paying off.
For the last several quarters, Kohl’s officials have said the Sephora at Kohl’s stores have seen single digit sales increases compared to the stores that don’t have them.
Kohl’s plans to have more than 850 Sephora at Kohl’s stores in operation by the end of the year.
“Bringing Sephora in is already bringing in a younger consumer,” Kingsbury said adding the company plans to expandi options for female shoppers.
“When the younger customers are coming in to buy Sephora we want to make sure that they can also buy women’s apparel, women’s accessories, women’s footwear... we really feel like we have something that’s started. We have something that’s bringing in a younger consumer now we need to expand it to other categories within the store.”
New 'targeted promotions' coming
Just because something is “on sale” doesn’t mean it will sell. Instead of Kohl’s putting large numbers of categories on different promotions, the company plans to test out which promotions work better than others.
“Whatever we do, we’re going to be very thoughtful and do everything at the appropriate pace,” Kingsbury said.
Kingsbury used the end of summer “back to school” time in the calendar as an example of what the company expects to do.
“We’re going to bring in some product that have everyday low prices,” Kingsbury said. “It’s small. It’s single digits as a percent to total. We’re going to learn from that and determine how big (the sale) is going to be or maybe it won’t be big at all.”
But those worried about Kohl’s Cash can rest easy – it will still be around.
“We’re not going to back off of Kohl’s Cash, that’s very important to the value equation overall,” Kingsbury said. “But we’re going to test other things.”
Getting rid of huge inventory backlog
Supply chain issues may have caused Kohl’s to buy in bulk, but that inventory has stacked up and become a financial burden.
A major focus is to be smarter with what the company is buying.
“We got out of control in 2022,” Kingsbury said. “We did a good job in 2021, but 2022 we had a big spike in inventory. So we need to improve those disciplines.”
Timm said reducing the amount of inventory can bring some flexibility to the company.
“This way we can chase into the right item, it helps the sell-throughs, it helps the margins because you’re buying the right goods,” Timm said. “That’s a core discipline that needs to be re-instilled into the organization. And quite honestly, the liquidity is going to go where the demand is.”
Let the customer lead the way
Kohl’s is looking to its customers to decide on what the company will invest more in as it navigates their need.
“We’re going to let the customer tell us what they want,” Kingsbury said. “Right now we feel like the active (clothing) business is really important, but we also feel like outdoor is important as well. So we’re going to integrate into some of the presentations, some of the outdoor product.”
This article originally appeared on Milwaukee Journal Sentinel: 5 takeaways from Kohl's call with analysts and their strategy for 2023
