- Kohl's saw a decline in sales during the holiday quarter, due in large part to inflation.
- But one analyst blamed messy Kohl's stores and "dispiriting" stores during the holidays.
Inflation hit Kohl's shoppers hard during the holiday quarter, the retailer said Wednesday.
The department store reported a 6.6% drop in sales and $302 million in losses during the quarter ended January 28. Executives blamed the diminished sales on inflation continuing to squeeze middle-class consumers, but inflation isn't the only culprit, according to GlobalData analyst Neil Saunders.
"Kohl's results reflect pressure driven by the ongoing persistent inflationary environment, says the CEO," Saunders tweeted. "No they don't, say I! They mostly reflect your abysmal lack of standards and operational control…"
—Neil Saunders (@NeilRetail) March 1, 2023
"Over the holidays, shops should be inspiring and uplifting, enticing consumers into buying," Saunders wrote in another tweet. "Kohl's were the opposite with messy merchandise, bad lighting, and uncoordinated ranges contributing to a dispiriting and confusing experience."
Kohl's Chief Executive Tom Kingsbury, who served as interim CEO before being elevated to the position permanently in early February, acknowledged during a call with investors Wednesday that the company needs to make changes to its stores, which represent nearly 70% of Kohl's annual sales.
"We're working on changing some of the flow of product, not tremendously, but we feel that we need to have more gifting up front," he said. "We did that in the fourth quarter, and it did very well, so we continued it for Valentine's Day. We're going to do it at Mother's Day, all the true gift-giving periods, just to have the store look a little bit different."
Kingsbury said that Kohl's store portfolio remains healthy. The company plans to embark on store refreshes and plans to open seven new stores in 2023, he said.
"We're working on sight lines," he said. "We're working on reducing the amount of graphics and signs we have in the store just to have a more modern feel in our stores overall."
Kohl's partnerships with other brands is driving sales, CEO says
Kingsbury also highlighted Kohl's partnership with Sephora, which operates store-in-store concepts in Kohl's locations across the US.
Kohl's plans to open 300 more Sephora shops in 2023, and Kingsbury touted the fact that customers buying beauty products from Kohl's Sephora shops helped drive same-store sales in 2022. It's one of two major partnerships with other brands — the department store also has a partnership with Amazon that allows customers to drop off Amazon returns at its store. Kohl's previously said that the Amazon partnership drew over 2 million new customers to its stores in its first year.
But one analyst warned that Kohl's is overly dependent on its partnerships with other retailers.
"It has long relied on other retailers' (Amazon and Sephora) brand equity to drive traffic and sales, which isn't a path to sustainable growth," Zak Stambor, senior analyst at Insider Intelligence, wrote on Wednesday. (Insider Intelligence is owned by Insider's parent company.)
It's been a challenging few years for Kohl's, which has experienced lagging sales and an onslaught of attacks from activist investors who criticized the company's performance and leadership. Looking ahead, Kohl's is dealing with a new top executive and a challenging economic forecast, Stambor said, and "righting Kohl's ship won't be easy."