Kohl’s To Roll Out Sephora Beauty Shops To All 1,100 Stores For $2 Billion In Sales By 2025

Retail Kohl’s To Roll Out Sephora Beauty Shops To All 1,100 Stores For $2 Billion In Sales By 2025 Sharon Edelson Senior Contributor Opinions expressed by Forbes Contributors are their own. I write about retail and the forces that are redefining shopping. New! Follow this author to stay notified about their latest stories.

Got it! Aug 18, 2022, 03:28pm EDT | Share to Facebook Share to Twitter Share to Linkedin Kohl’s delivered Q2 financial results today and said its future rests on its partnership with . . .

[+] Sephora. Courtesy of Kohl’s Kohl’s Corp. today delivered results for the second quarter ended July 30 amid a weakening macro environment, limpid consumer spending and rampant inflation, which is impacting much of the retail industry, leaving little money for discretionary categories such as apparel.

But Michelle Gass, CEO of Kohl’s announced today on the retailer’s earnings call that its Sephora partnership is being rolled out to all 1,100-plus stores from the 600 that initially opened in two waves. Gass is hitching Kohl’s wagon to Sephora, banking on the shops to deliver long-term results. “Today’s announcement is really a testament to both companies feeling so great about the partnership and not only what it’s delivering in the near term but the opportunity long term,” Gass told me after the call with analysts.

“It’s working. This partnership is a win-win, and if you think about it from the Kohl’ s standpoint, despite some of the headwinds we’re facing right now from a macroeconomic standpoint, Sephora is proving to be quite resilient. “In the stores where we’re putting in the Sephoras, we’re seeing a significant lift in [performance],” Gass said.

“We’re putting in beautiful Sephora shops, but we’re changing lots of other things, too. We’re refreshing, we’re remodeling and that’s our future. Sephora hasn’t been a big enough percentage of the base to dramatically impact the results [yet,] but the opportunity is ahead of us.

We’ll see that in the back half of the year and next year. ” Sephora at Kohl’s shops have their own dedicated entrance. Courtesy of Kohl’s The 200 Kohl’s stores with Sephora that opened in 2021 have maintained a high-single digit percent sales lift, relative to the balance of the chain.

And in the nearly 400 stores opened this year, “we are seeing a mid-single digit percent sales lift, which is consistent with the initial performance in the first 200 stores,” Gass said. MORE FOR YOU ‘No Christmas Trees, No Christmas Trees’ Another Shortage May Be On The Way The Grocery Business Is Going To Get Much More Competitive Costco Addresses Supply Chain Pains By Chartering Their Own Ships Nonetheless, Gass is still being cautious with full-year 2022 guidance, revising both the top and bottom lines. Net sales are now expected to decline in the range of (5%) to (6%) as compared to the prior year.

Operating margin is now expected to be in the range of 4. 2% to 4. 5% and earnings per share is now expected to be in the range of $2.

80 to $3. 20, excluding any non-recurring charges. Wall Street punished Kohl’s as second quarter metrics beat analysts downward revised expectations.

Comparable sales decreased 7. 7% and net sales decreased 8. 5%.

Second quarter diluted earnings per share of $1. 11 were reported versus the $1. 03 that was expected.

Revenue was $4. 09 billion compared to the $3. 85 billion analysts forecast.

Kohl’s net income for the second quarter plummeted 63% from $382 million to $143 million. “It’s largely driven by our sales coming down, and we’re taking into account the gross margin pressure, inflation in our cost of goods and the more promotional environment,” Gass said. “That being said, we still have conviction about our long term framework.

“The headline is that our customer – we have a middle-income customer – is feeing a lot of pressure on the more everyday things like food and gas and disposable items, Gass told me. “Inflation is at a four-year high so the increases they’re having to pay on food – everybody’s talking about it, and at the gas station, the price has come down just a notch, but it’s still really high. ” Kohl’s is actually seeing growth in its higher-income customers, and those customers are spending more.

“But the core of our business is feeling that [pressure]. We’re driving new promotional activity that resonated with customers in July. We’re seeing an improvement in the business, and we’ll carry that through to holiday,” Gass said, adding, “I’m looking forward to the holiday season.

We’re expecting these pressures to persist, but holiday is a really important time for people to celebrate and people are still going to want to have some joy around the dinner table or holiday and that’s the time when Kohl’s really shines. ” Kohl’s also announced today that it has entered into $500 million ASR agreement and remains firmly committed to its current dividend and focused on maintaining a strong balance sheet with the long-term objective of sustaining its Investment Grade rating. In January, Kohl’s received an unsolicited $9 billion takeover offer from activist investor Starboard Value through Acacia Research Corp.

The offer was for $64 per share compared to the closing price of $46. 84 at the time. “The board did a lot of work and went through a very robust and diligent process, and then based on what’s happening in the financial markets in the retail industry, ultimately, there was not a fully-financed deal for the board to react to,” Gass said.

“I would say that the board is always open to shareholder value creation, like what were doing today with our $500 million share repurchase. We’re investing in ourselves. ” Gass said the Sephora and Kohl’s teams are collaborating very well.

“We have some new innovations we’re testing like a cross-company buy online, pick-up in store,” she told me. “I don’t know of any other example in retail with a scenario like this. The opportunity is ahead of us and it’s the number one initiative for the company to drive our growth going into the future,” Gass said.

“It’s like we have a business here that we need to reinvent for today and tomorrow’s consumer and we’re on that journey now in our vision to be a leader in the active and casual lifestyle. “It doesn’t happen overnight but we have this ambitious vision of being the leading retailer for the active and casual lifestyle, so we’re pivoting from department stores to a lifestyle concept and that’s how customers are living their lives, in casual apparel. It’s discovery, it’s activewear,” she said.

“We’re evolving from a department store to a focused lifestyle concept. ” “While we’re lapping some extraordinary numbers, that trend is here to stay, and we want the experience to be easy and inspiring,” Gass added. “We’re doing a lot with discovery brands.

We’re an incredible platform for theses new brands that don’t have the resources to scale overnight. That’s an untapped opportunity. It’s like bringing all these things together, from Sephora to Tommy Hilfiger, Eddie Bauer and Calvin Klein.

We want to have a pipeline to keep the customer curious about what’s new at Kohl’s. ” Follow me on Twitter or LinkedIn . Check out my website or some of my other work here .

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