Kohl's (KSS) Gains on Strategic Growth Efforts & Partnership
Focus on strategic efforts, which include enhancing customer experience, are working favorably for Kohl’s Corporation KSS. The leading omni-channel retailer undertakes prudent partnerships, which fuel growth. Strength in omni-channel capabilities is worth noting.
Let’s discuss this in detail.
Strategic Efforts on Track
Kohl’s is progressing toward its 2023 key priorities, including improving customer experience, simplifying value strategies, undertaking disciplined inventory and expenses management and solidifying the balance sheet. Management is focused on driving growth in gifting, Sephora, impulse, home decor and longer-term new stores to enhance customer experience. The company has various opportunities to drive its core apparel and footwear offerings.
Kohl's is committed to driving growth with its loyalty programs, including Kohl's Cash, Kohl's Rewards and private-label credit cards. In the second quarter of fiscal 2023, management launched a co-brand credit card with Capital One to a few customers. Furthermore, KSS reduced inventory by 14% in the fiscal second quarter. Kohl's is on track with managing costs, focusing on lowering the marketing spend ratio and bringing more extraordinary technology into its operations to enhance productivity.
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Partnership Boosts Performance
Kohl’s solid partnership with Sephora to create a new era of elevated Beauty at Kohl's is noteworthy and generating impressive results. In its last earnings call, management highlighted that Sephora Kohl's continues to exceed its expectations, fueling a total beauty sales rise of approximately 90%. The company opened nearly 200 Sephora shops during the second quarter of fiscal 2023. Sephora will be featured in over 900 stores by the end of 2023. The company will expand the small format Sephora shops over the next couple of years.
Omni-channel Strength
Kohl’s is focused on growing its store portfolio and accelerating digital business growth. Management is on track to open seven new stores, including one relocation, during 2023. Given the need of the hour, management has also been speeding up its digital marketing and enhancing its website to cater to customers’ needs.
The company’s solid endeavors to boost mobile traffic have augmented the adoption of the Kohl app, making it a vital constituent of online sales. To improve online offerings, Kohl’s has been expanding its e-commerce fulfillment centers and strengthening in-store pickups.
Is All Rosy for Kohl’s?
During the fiscal second quarter, Kohl's gross margin contracted 61 basis points (bps) year over year to 39%. The downside can be attributed to product cost inflation and increased shrinkage.
The company’s SG&A expenses escalated by 1.6% to $1,304 million. The rise in such costs was mainly due to wage pressure, increased store expenses on Sephora openings and store experience investments. SG&A expenses rose 208 basis points (bps) to 33.5% as a percentage of total revenues. Management expects fiscal third-quarter SG&A expenses to increase nearly 3% year over year due to additional store-related investments and 45 Sephora small shop openings.
Nevertheless, focus on growth endeavors will likely help Kohl’s stay afloat amid such hurdles.
Shares of the Zacks Rank #3 (Hold) company have increased 8.1% in the past three months against the industry’s decline of 7.7%.
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Kohl's Corporation (KSS) : Free Stock Analysis Report
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