Kohl’s Q1 Earnings Announcement Features Big Bet On In-Store Traffic

A funny thing has happened on the way to the demise of the department store. Apparently Macy’s and Kohl’s didn’t get that memo. After Macy’s reported a surprising swing to a profit earlier in the week, Kohl’s checked in on Thursday (May 20) with a Q1 jump in revenues and an optimistic outlook for the rest of the year.

Like Macy’s, Lowe’s, Target, Home Depot and other retailers that reported Q1 earnings this week, stimulus payments played a role in that performance as did eCommerce sales. By the numbers, Kohl’s net income hit $14 million, from a loss of $541 million in 2020.

Revenue spiked 69 percent to $3.89 billion from $2.43 billion a year earlier.

The company said its store sales more than doubled during the quarter, while digital sales rose 14 percent year over year. CEO Michelle Gass told the earnings call audience that digital sales are up more than 40 percent compared to 2019 and it accounted for 30 of all sales. She said 40 percent of digital sales were fulfilled in-store.

However, it was clear during the earnings call that Kohl’s approach to the retail recovery will be store-based. While recent earnings calls from other retailers have focused almost exclusively on the digital-first economy, Kohl’s is stressing a return to casual lifestyle apparel and in-store partnerships to achieve its 2021 goals.

“Last October we debuted a new strategy with an even more significant pivot towards the active and casual lifestyle,” Gass said on the call. “And as we sit here today that strategy has never been more relevant at Kohl’s. Everything starts with the customer, and our research analytics and sales trends validate that three key consumer behaviors will only grow in importance: consumers are looking for a more active and casual lifestyle, an even easier and more convenient shopping experience and clear and compelling value.”

Gass called out the company’s commitment to becoming a beauty destination via its partnership for stores-within-stores with Sephora. She also singled out promotional relationships with Nike, Champion and Calvin Klein as building blocks for the company’s growth during the year. Other improvements will include redesigned stores and additional lifestyle and athleisure brand partnerships.

While Kohl’s is thinking store first and digital second, it is not ignoring eCommerce. Gass said Kohl’s is improving its onsite experience and adding more personalization tools. Its mobile app accounted for 30 percent of digital sales in Q1 and digital customers and total digital orders averaged higher than in-store transactions.

She also touched on the success of Kohl’s loyalty program, which integrates online and offline sales with “Kohl’s cash” rewards serving as its foundation. She said research showed that its loyalty program has added significant value and convenience and will be expanded as the year progresses.

“We have been very pleased to continue to see our new customer acquisition efforts pay off with the loyalty program,” Gass said. “We continue to bring in a lot of new customers in the first quarter, and that’s been exciting to see really across those channels, both as people got more in stores and then complemented with customer acquisition digitally. We have increased retention, increased enrollment, and we’re leveraging all the data we get on these customers to drive greater focus on personalization.”

Although the company raised its guidance for the year, Gass also warned that the consumer spending picture is still volatile, although it is improving with vaccine distribution. With its bet on in-store foot traffic, consumers will need to be comfortable returning to stores. According to new PYMNTS survey data, Consumers and the New Retail Landscape, consumers remain most excited to see their families and friends again, closely followed by traveling in the U.S., shopping in stores, dining out and getting their kids back into school. Consumers have also become less concerned about the impact of COVID-19 on their and their families’ lives (53 percent), down from a high of 72 percent in July of 2020.