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Kohl’s has been losing customers, paying vendors late, and churning through CEOs, but the department store seems to be finally turning things around.
The latest earnings report from the company that won’t stop stuffing Kohl’s Cash in your mailbox blasted past expectations on both top and bottom lines, reporting revenue of $3.35 billion (versus $3.32 billion expected) and EPS of 56 cents (versus the anticipated 29 cents). Although the retailer is bracing for a loss in net sales this year, its revised guidance minimizes that decline to just 4% to 5%.
This not-so-bad news suggests that Kohl’s rebound efforts are “beginning to resonate with customers,” Interim Chief Executive Michael Bender said in a statement. And despite a drop in its stock earlier this week due to rumblings over delayed payments to vendors—a red flag that screams “financial troubles”—investors seem ready to embrace this comeback story. Shares shot upward 24% today.
Kohl’s troubled backstory
Kohls has been mired in a sales slump for years. Same-store sales have plummeted for 14 quarters straight, including a 4.2% drop in the most recent quarter ending in August.
The store’s struggles haven't been helped by its revolving door of CEOs, with five taking the helm in the past 10 years, including three in the last three years alone. The last, Ashley Buchanan, was at the helm for fewer than 100 days before he was canned in May over an undisclosed romantic relationship with a coffee vendor.
Since then, Kohl’s has bent over backward to clean up its act and win back customers. Stores have reinstated the petite section, which was eliminated much to the chagrin of smaller-boned clientele. The introduction of mini Sephora shops has worked its magic, attracting younger shoppers, while coupons and other discounts were expanded to attract more bargain hunters. The chain of 1,153 stores also expanded in Q2 by another 300 locations, along with redesigned “impulse queue lines” near checkout to boost sales.
“We really think we're set up well ... to deliver value when it's going to become incredibly important to that customer in the back half and especially holiday," CFO Jill Timm said on a post-earnings call. But are they doing enough? Not everyone is convinced.
"The topline beat gives management some breathing room, but Kohl's is still stuck in the squeezed middle of retail—forced to discount heavily to move product while struggling to articulate a clear brand identity," noted EMarketer analyst Suzy Davidkhanian in Reuters.—JD