Retail

Despite Amazon Relationship, Kohl’s Has Sour Holiday Season

The year is off to a less-than-stellar start for Kohl’s.

The retail chain has yet to report its fourth-quarter or full-year 2019 earnings, but in a statement released this week (Jan. 9), Kohl’s said that its “comparable sales for fiscal November and December 2019 combined (the ‘holiday period’) decreased 0.2 percent over the same period last year.” That’s not the only bad news that Kohl’s gave investors. “Based on the holiday period sales performance, the Company now expects its fiscal 2019 diluted earnings per share to be at the low end of its previously announced guidance range of $4.75 to $4.95.”

Kohl’s gave a few details about why holiday season sales decreased.

“We continue to see momentum in key areas, including our digital business, active, beauty and children’s, and solid performance in footwear and men’s,” said CEO Michelle Gass in the statement. “This was offset by softness in women’s, which we are working with speed to address.”

Kohl’s has been trying to increase the appeal of its brick-and-mortar retail offerings, including via a deepening relationship with Amazon. Indeed, in 2019, Gass said in an earnings conference call that the Amazon returns program was seen as a significant initiative and a “great example of our innovative spirit.” (As previously reported, the department store retailer will accept “eligible” Amazon items without a label or box.) The partnership with the eCommerce retailer, Gass noted in the call, reflects the collective strengths of both merchants.

Amazon Appeal

Gass pointed out that Kohl’s has a robust nationwide footprint and best-in-class omnichannel capabilities. Amazon, on the other hand, has an expansive customer reach and world-class digital capabilities. She also noted that the effort aligns perfectly with the company’s top strategy of driving traffic. “The overarching goal of this program is to convert the traffic that comes into our stores into loyal Kohl’s shoppers over time,” Gass said.

When it comes to Amazon returns, Gass noted that the company finished the nationwide rollout of the program late in Q2.

The retail chain’s third-quarter earnings, released in late 2019, seemed to validate the Amazon relationship. Right after those financials were reported, Gass said the program is driving incremental traffic to its locations, and that the company is “particularly encouraged by the disproportionate amount of new customers.” She also pointed out that the 2019 holiday season will be the first with Amazon returns in stores across the country.

But even with digital sales growth and the Amazon returns program in stores across the country, Kohl’s Corporation posted third-quarter results that fell short of analysts’ estimates.

During late 2019, Kohl’s also enhanced its marketing offers and invested in pricing. Gass noted that its “decisive actions were successful” and allowed for “strong sales performance in October,” although she noted the quarter didn’t meet the company’s expectations.

In terms of digital, Gass said the company is pleased with the momentum it sees. Digital sales rose at a mid-teens rate in the third quarter. She also pointed out that the Kohl’s app grew significantly quicker than digital overall during Q3, “with nearly double the traffic growth and nearly triple the sales growth as our loyal customers have increased their usage.”

Other Retail Troubles

Kohl’s is not the only major retail reporting trouble in early 2020. As part of its yearly review process, Macy’s plans to shutter one Bloomingdale’s store and 28 of its namesake department stores. The retailer operates approximately 680 department stores as well as 190 specialty shops, CNBC reported.

Macy’s has been seeking to win back shoppers who are turning more to eCommerce and frequenting shopping malls less often. The retailer has been working to bolster its product offerings and revamp its store designs. Macy’s has also been testing out experimental store formats like Backstage, in an attempt to compete with discount stores like T.J. Maxx.

Department stores have been having a rough time overall. Sales in the industry dropped 1.8 percent from Nov. 1 through Dec. 24, per Mastercard Spending Pulse. Some merchants were providing large discounts to bring consumers into their locations over the holidays.

As for Kohl’s, it is scheduled to report Q4 and full-year 2019 earnings on March 3, followed by its Investor Day on March 16. Presumably, more details about the Amazon relationship and other efforts to sweeten the brick-and-mortar proposition will also come at that time.

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