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Kohl’s holiday look offers glimpse into turnaround plan


At Kohl’s stores, Chief Merchant Nick Jones said shoppers will see a mix of elevated items and sharp price points. For example, the company has signs that call attention to low prices of some sweaters, but is also has added European-made glassware to its home decor.

Melissa Repko | CNBC

As shoppers head to Kohl’s stores this holiday season, they will see gift ideas, Christmas ornaments and a potential glimpse of the retailer’s future.

It marks the first peak shopping season overseen by Kohl’s new CEO, Tom Kingsbury. The retail veteran, who previously led off-price chain Burlington Stores, officially stepped into the role early this year after serving on an interim basis. He succeeded Michelle Gass, who departed to become CEO-elect of Levi Strauss.

Kohl’s kicked off the latest effort to refresh its brand as it navigates a confusing economic backdrop, and after it faced scrutiny from activist investors and failed to secure a deal to sell to the Franchise Group, owner of The Vitamin Shoppe. Its sales and stock price have lagged.

As it tries to turn around its fortunes, Kohl’s has focused on sharpening the look of its stores and the brands and merchandise it carries, Kingsbury said. By leaning into popular brands and categories, he said the company could return to sales growth in 2024.

“Home decor, pet, gifting, impulse, all the things that we’ve been talking about will really help us get there,” he told investors on an August earnings call.

Net sales for Kohl’s most recent full fiscal year, which ended in January, totaled $17.2 billion — a nearly 9% drop from the fiscal year that ended in early 2020, shortly before the Covid pandemic shook up spending patterns.

Shares of the company are down about 17% this year, underperforming the 12% gains of the S&P 500 and the roughly flat performance of the retail ETF, the XRT.

Kohl’s has forecasted that full-year sales will decline by 2% to 4%, including the approximately 1% impact of a fiscal year that’s one week shorter.

Along with its own strategy shift, Kohl’s is gearing up for a season when consumers have sent conflicting messages about how much they’re willing to spend and what they think is worth buying, even as some tighten their belts.

At a store tour in Ramsey, New Jersey this week, even some timely items like Christmas decor and fall sweaters were 40% or 50% off — an indicator that the retailer is trying to move merchandise and appeal to more budget-minded customers.

“We know they’re stretched,” Chief Marketing Officer Christie Raymond said. She said the company is watching factors like rising credit card debt, dwindling savings and the return of pandemic-paused student loan payments.

But she added shoppers are still spending — sometimes starting early to hunt for the best deals or perfect items that seem worth the money.

Kohl’s set its holiday merchandise at stores in the first week of October, weeks earlier than the pre-pandemic holiday season in 2019 and even earlier than the past couple of years, when Covid threw off the typical shopping cadence, Raymond said.

Here are major strategies that Kohl’s is leaning into this holiday season and beyond:

Beauty is one of the rare discretionary categories where shoppers have been splurging, despite inflation. Kohl’s has leaned in by opening more Sephora shops inside of its stores.

Melissa Repko | CNBC

Betting on beauty

From perfume to mascara, beauty is one of rare categories where shoppers have continued to splurge — even as they deal with pricier groceries, higher interest rates and bigger utility bills.

Kohl’s has leaned into that by adding more Sephora shops to its stores. This holiday season, it will have about 900 of the shops — meaning they’re now in the vast majority of its more than 1,100 stores across the country. It will carry some exclusive items, too, like gift sets only sold at Kohl’s.

The retailer has leaned heavily into the strategy. Last holiday season, roughly half of Kohl’s stores had a Sephora shop. Two holiday seasons ago, which marked its first with the beauty shops, they were in 200 locations.

Sephora at Kohl’s has been one of the company’s brightest spots, especially during a time when customers have become more reluctant to spring for discretionary items. Total beauty sales for the company rose nearly 90% year over year as of July 29, the end of the most recent fiscal quarter.

Raymond said Sephora has drawn younger, more diverse shoppers to stores, but also been popular with Kohl’s longtime customers.

In the next few years, Kohl’s plans to open smaller versions of the shops in the rest of its stores. And it’s looking for ways to get those new customers it’s reeled in to browse and buy merchandise from other parts of the store, said Nick Jones, the company’s new chief merchandising and digital officer. He joined Kohl’s earlier this year, after working for British retailers, including Marks & Spencer and ASDA/Walmart UK.

Kohl’s has expanded areas where shoppers can grab last-minute items.

Melissa Repko | CNBC

Leaning into impulse buys

As shoppers rush around during the peak shopping season, Kohl’s wants to tempt them to grab one — or ideally, two or three — more things.

Kohl’s has made more room in the cash register area for impulse items and stocking stuffers, such as candies, small toys and stuffed animals. It also has a dedicated display of grab-and-go beauty items from Sephora, such as face masks or lipsticks.

It’s also sprinkled gift ideas throughout its stores, such as aisles where customers may spot a Barbie dream house for their child or a high-tech toaster oven for their sister-in-law.

Jones said Kohl’s wants to simplify the season for busy families. That means not only having a wide variety of merchandise, but also guiding them toward good deals with signs that advertise discounts and displays that include creative gift ideas, such as a colorful sweater, children’s books or a collection of hot sauces.

It also cleared away space in the front of store by taking out some cash registers, so that customers see trend-driven or seasonal items when they walk in.

Kohl’s sells cookware and throw pillows, but it’s adding more home decor like wall art and vases, too.

Melissa Repko | CNBC

A haul for the home

Pet merchandise is getting more square footage at Kohl’s stores. The retailer is carrying dog and cat toys, but also items like shampoo and treats.

Melissa Repko | CNBC

And something for Fido, too

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