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Kohl’s Credits Speed, Agility for Q1 Positive Performance

Kohl’s sees positive Q1 results in key categories on ongoing supply chain, store and distribution initiatives, prompting guidance boost.

In a Nutshell: In its first quarter earnings release, Kohl’s new CEO Michelle Gass said the company is off to a “strong start to fiscal 2018.”

The retailer lauded the home category in particular, which “significantly outperformed,” and noted the footwear and men’s wear businesses were also strong during the period. Led by a 10 percent comp growth, Kohl’s has committed to testing an activewear department that’s 50 percent larger in 30 stores. The retailer noted that its women’s business improved during the quarter, owing to its speed initiatives, assortment and value.

On the other hand, Kohl’s acknowledged kids’ gave it the most trouble, calling the department one of the most weather sensitive categories.

Overall, Kohl’s said the southeast struggled while the northeast and mid-Atlantic regions were dragged down by snow events and unseasonably cool weather.

Kohl’s credits its speed and flexibility with driving better sell-throughs and therefore fewer markdowns. The company said gross margin was up as a result of inventory discipline, speed through localization and its rightsized stores.

Six months in, Kohl’s calls its tie-up with Amazon—which brings the online behemoth’s gadgets in to shop-in-shops and allows its customers to make returns in the department store—“a positive experience.”

Kohl’s updated its guidance from an adjusted earnings per share for the year of $4.95 to $5.45 to $5.05 to $5.50.

Sales: The retailer reported revenue of $4.2 billion during the quarter, compared to $4.1 billion during the same time last year.

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Comparable sales were up 3.6% in the quarter with digital sales up 19 percent. Mobile contributed nearly half of those sales. Though transactions were flat, average unit retail drove average transaction value up. Comps were also bolstered by the pre-Mother’s Day Friends and Family promotion, which landed in the first quarter this year.

Earnings: Kohl’s reported net income for the first quarter of $75 million, or 45 cents per diluted share, a 14 percent increase over the $66 million, or 39 cents per diluted share, it reported during the prior-year period.

CEO’s Take: “Given the weather headwinds…the organization proactively leaned into less seasonally dependent categories such as home, active footwear and apparel, denim and wear now in key item basics,” Gass said. “This strategy along with our digitally forward agile approach to marketing allowed us to deliver strong sales results for the quarter, and is a true testament to the team’s innovative thinking and cross-functional collaboration.”