Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sephora at Kohl's continues to drive strong sales growth, with total beauty sales increasing 15% in Q3.
- The company has successfully launched Babies"R"Us shops in 200 stores, attracting younger customers and expanding its market reach.
- Kohl's Corp (KSS, Financial) is focused on improving inventory management, with a 40% increase in in-transit inventory for private brands, expected to benefit sales in Q4.
- The company is taking aggressive actions to stabilize sales trends, including increasing marketing efforts and reintroducing popular categories like fine jewelry.
- Kohl's Corp (KSS) has managed expenses down by 5% in Q3, demonstrating effective cost control amidst sales challenges.
Negative Points
- Comparable sales declined 9% in Q3, with significant softness in apparel and footwear businesses.
- Traffic declined approximately 3% in Q3, particularly during the back-to-school season, impacting overall sales performance.
- The reduction in receipts for private apparel brands led to a 20% decrease in inventory, affecting sales of key value items.
- The exit from the fine jewelry business created a persistent headwind to sales, which the company is now trying to reverse.
- Kohl's Corp (KSS) has lowered its full-year guidance, expecting net sales to decrease by 7% to 8% compared to 2023.
Q & A Highlights
Q: What actions are being taken to improve traffic trends in Q4 and into 2025?
A: Thomas Kingsbury, CEO, stated that showcasing great values on the selling floor and targeting the most engaged customers with more direct mail and targeted offers are key strategies. Additionally, they are leaning into social and digital marketing to drive new customer acquisition and leveraging the 4 million new rewards members added in 2024.
Q: Can you provide an update on the credit card trends and expectations for the co-brand rollout?
A: Jill Timm, CFO, mentioned that credit is performing as expected, with payment rates starting to drop. The co-brand launched in mid-September, and its benefits will be more prominent in Q4 and 2025 as customers use the card and balances revolve, contributing to interest income.
Q: Why is now the right time for the CEO transition, and what are the expectations for strategic continuity?
A: Thomas Kingsbury, CEO, explained that he signed up for a two-year term, and the timing worked out with Ashley Buchanan's availability. Michael Bender, Independent Chairman, added that Ashley is aligned with the current strategy but will bring his perspective. The transition is planned to be orderly, with Tom staying on as an advisor.
Q: How are you addressing the unintended consequences of changes in private brands and market brands?
A: Thomas Kingsbury, CEO, acknowledged the under-placement of private brands as a significant issue. They are working on balancing market and private brands better and ensuring the right receipt reduction ratios. Jill Timm, CFO, emphasized the importance of maintaining core brands while using market brands for fashion elements.
Q: What steps are being taken to recapture lost customers due to changes in private brands and jewelry counters?
A: Jill Timm, CFO, highlighted increased marketing investments, including direct mail and targeted offers, to re-engage customers. They are focusing on promoting the return of jewelry and petites, leveraging Kohl's cash, and enhancing customer awareness through various marketing channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
