Kohl’s, Burlington, Five Below and Dollar General Pivot as Consumers Seek Deals

The financial results for four major retailers — Kohl’s, Burlington Stores, Dollar General and Five Below — in the second quarter of 2024 highlighted a range of performances and strategic responses. From growth and resilience to challenges and adjustments, their fiscal performances provide insights into how they are navigating the evolving retail environment.

Kohl’s Repositions to Stop Sales Drop

Kohl’s endured a challenging second quarter as its net sales decreased 4.2% and comparable sales sank 5.1%.

Tom Kingsbury, Kohl’s CEO, told investors and analysts company officials “have taken significant action” to reposition the company for future growth.

However, “our efforts have yet to fully yield the intended outcome due in part to a continued challenging consumer environment and softness in our core business. During the second quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently. This overshadowed strong performance in our key growth areas, including Sephora, home decor, gifting, and impulse. In spite of this, we continued to execute well operationally, enabling us to deliver a 13% increase in earnings driven by gross margin expansion and strong inventory and expense management.”

Kohl’s beauty sector led the way for the second quarter. Sephora at Kohl’s achieved notable success with total beauty sales increasing approximately 45%.

Additionally, Kohl’s launched its partnership with Babies “R” Us, opening more than 100 baby shops in August with plans to complete 200 by September. This initiative includes baby gear, furniture, accessories, and a new maternity brand, Motherhood. The Babies “R” Us registry will launch in Q3, aiming to enhance offerings for young families and potentially boost sales in infant and newborn apparel.

Looking forward, Kingsbury said company officials will “capitalize on new opportunities such as our partnership with Babies “R” Us and expect to continue to benefit from our key growth areas. Our conviction in our strategy remains strong and our operating discipline, solid cash flow generation, and healthy balance sheet will continue to support us as we work to return Kohl’s to growth.”

Burlington Leverages Supply Chain Efficiencies

Meanwhile, Burlington Stores, an off-price retailer known for its high-quality branded apparel and home merchandise, reported strong second-quarter results. The company experienced a 5% increase in comparable store sales and a 13% rise in total sales, exceeding expectations.

CEO Michael O’Sullivan was pleased with the results, stating: “This strong performance was driven by the ahead of plan sales, as well as a significant increase in gross margin, and faster than expected progress in our supply chain efficiency initiatives.”

Off-price retail offers branded apparel, footwear, accessories, home and other merchandise at significantly lower prices than other retailers. They achieve this by taking advantage of disruptions and cancellations in the supply chain for this merchandise.

“We remain confident in the outlook for our business for the balance of fiscal 2024,” O’Sullivan said. “Based on our year-to-date performance, we are increasing our margin and earnings guidance for the full year, despite some incremental cost pressure from ocean freight. That said, there are some risks, so we are planning our business cautiously, and maintaining our comparable store sales guidance of 0% to 2% growth for the second half.”

Dollar General Sees Consumers Pull Back

For Dollar General CEO Todd Vasos, the company’s second-quarter performance fell short. Despite increases of 4.2% in net sales, driven by new store openings and a rise in same-store sales, which grew 0.5%, the company’s operating profit fell 20.6%, to $550 million.

“We made important progress on our Back to Basics plan in the second quarter,” Vasos said. “However, despite advancing several of our operational goals and driving positive traffic growth, we are not satisfied with our financial results, including top-line results below our expectations for the quarter.”

While he partially attributed softer sales trends to “a core customer who feels financially constrained,” Vasos explained, “we know the importance of controlling what we can control. With the evolving retail and consumer landscape in mind, we are taking decisive action to further enhance our value and convenience offering, as well as the in-store experience for our associates and customers.”

Vasos expressed confident about the company’s future, saying: “Dollar General has a long history of serving customers in a variety of macroeconomic environments, and we believe the actions we are taking will allow us to further strengthen our position and build on our Back to Basics progress, as we seek to deliver sustainable growth and long-term shareholder value.”

Part of the Back to Basics plan refocuses strategy on fundamental improvements to enhance customer experience and operational efficiency. Dollar General has made strides in addressing supply chain issues, but aims for further improvements. The retailer plans to enhance its distribution network with timely deliveries, better inventory management and reduced reliance on temporary warehouses to cut costs and increase sales. Additionally, Dollar General will increase discounts and streamline its product assortment to attract shoppers and enhance turnover.

Five Below Pares Down Inventory to Focus on Gen Alpha

Five Below’s second quarter was mixed as net sales increased 9.4% to $830.1 million, while comparable sales fell 5.7%. The company expanded its footprint by opening 62 new stores, ending the quarter with 1,667 locations across 43 states, reflecting an 18.5% increase in store count from the previous year.

Ken Bull, interim CEO, president and COO of Five Below, told investors that economy pressures had weakened the latest results.

“Our second quarter results fell short of what we know this business is capable of delivering. Our response to the macro pressures of the last few years and the evolving consumer environment has required even greater execution, compelling and differentiated assortments and focus on the customer,” he said.

But Bull believes the issues can be fixed: “We are refocused on delivering an edited assortment that leads with value and newness to wow our core pre-teen and teen customer, maximizing each of our worlds and offering a fun store experience that reflects our brand. … I am confident in the core appeal of Five Below, the underlying strength of our business model, the talent of the teams across the company, and our ability to reinforce our destination appeal and improve our results.”

Five Below Founder and Executive Chairman Thomas G. Vellios told investors and analysts the company is focused on its core customers.

“We are prioritizing initiatives that enhance value, improve the shopping experience, streamline our operations, and ensure that we meet the evolving needs of our customers,” he said. “Specifically, we need to regain our speed and intensity in identifying and bringing in key trend items into our stores that delight our customers. We need to deliver more wow and value, which, for Five Below, is the intersection of trend, quality, and price.”