Kohl’s Sales Dip As Consumers Prioritize Essentials

Kohl’s sales continue to slip as its shoppers continue to face household budgetary pressures.

The department store chain reported quarterly earnings Wednesday (Aug. 26) showing a 0.9% decrease in both net and comparable sales, marking the 18th straight quarter in which Kohl’s has seen revenues decline.

Speaking during an earrings call, Kohl’s CEO Michael Bender said shoppers continue to seek value as inflation forces families to prioritize essential bills over retail shopping.

These “increasingly choiceful” consumers are “middle to lower income” customers who are sitting around the kitchen table trying to make life work,” the CEO said.

They’re dealing with “gas prices, food, heating bills, things like that, that need to be taken care of as essential components of the cost structure that a family has,” Bender said. “And then after that, making sure that they have enough left over to continue to run their household. And that’s where we are leaning in heavily to value and making sure that all of our efforts are geared toward making sure that value is a part of what we offer.”

Research by PYMNTS Intelligence has charted the struggle consumers are facing. The August edition of the PYMNTS Consumer Expectations Index (PCEI) showed that the share of households who live paycheck to paycheck and are struggling to pay bills climbed to 27% from 18% a year earlier.

“Meanwhile, the share not living paycheck to paycheck fell to 33% from 38%. Only 5.2% of households that were struggling a year ago had moved completely out of paycheck-to-paycheck living by August,” PYMNTS wrote Wednesday.

This sort of financial squeeze has triggered a noticeable shift in how consumers allocate their remaining dollars, Kohl’s management said. CFO Jill Timm pointed out that shoppers are trading down to lower-priced merchandise.

Kohl’s has seen strong performance in its opening price point proprietary brands, such as Sonoma, Techgear and The Big One, as consumers seek budget-friendly alternatives to national brands.

At the same time, management noted that consumers are still willing to spend when they find specific personal resonance or novelty. For instance, the company saw strong sales of patriotic Americana home decor as well as “Neato Squishies” and giftable fashion jewelry.

Meanwhile, the Sephora at Kohl’s business experienced headwinds during the quarter, as sales fell 4%, Bender said.

“While we continue to see strong customer demand for newness, the top line performance was pressured by the impact of expanded distribution for several of our key brands,” he added.