Yahoo Finance Coronavirus ‘dramatically accelerated’ e-commerce up to 5+ years: Kohl's CEO
Top U.S. infectious disease expert Anthony Fauci warned last week that a record coronavirus wave will likely worsen over the winter months, dampening the spirits of Americans suffering from quarantine fatigue but promising a continued boom for e-commerce.
In a new interview, Kohl’s (KSS) CEO Michelle Gass told Yahoo Finance that COVID-19 has “dramatically accelerated” online shopping, shifting customer behavior up to five or more years earlier than it would have otherwise.
But the head of the department store giant vowed “confidence” that brick-and-mortar stores would always play a role in retail, citing heightened online demand from customers who live near a physical location.
“Clearly COVID has dramatically accelerated digital adoption,” Gass says. “I mean, some would say, five-plus years what it typically would have taken across all demographics.”
“We're always going to go where the customer is,” she adds. “So we're leaning into that.”
Kohl’s temporarily closed its nearly 1,200 stores nationwide in the early weeks of the coronavirus outbreak, causing sales to plummet 33% in the first half of the fiscal year. But the company saw an increase in digital sales, including a 58% spike in the second quarter compared to the same quarter last year even as overall sales dropped 23% year-over-year.
Gass called e-commerce a “growth engine” for the company, but said brick-and-mortar sales complement the online business.
“We have close to 1200 stores and they're healthy,” she says. “So 99% of them are cashflow positive; 90% of them are generating over a million dollars of cash.”
“An important factor that I think isn't spoken enough about is that where we have a store, our digital sales around the store actually increase,” she says. “I have complete confidence and conviction that even in this digital acceleration, there's going to be a role for stores.”
U.S. consumer spending rose 1.4% in September, the fifth straight month of gains but a more modest jump than the sharp increases earlier in the year. Kohl’s will release its third quarter earnings later this month.
But coronavirus shutdowns and the rise of e-commerce have taken a toll on major department store brands. J.C. Penney filed for Chapter 11 bankruptcy in May, and said last month it hopes to exit bankruptcy by Christmas. Macy’s avoided bankruptcy in June by securing about $4.5 billion in funding that will help it pay for operations and new inventory.
Meanwhile, the pandemic fueled an increase in sales for big box retailers like Target (TGT) and Walmart (WMT), which have seen significant growth in their e-commerce business.
Gass spoke to Yahoo Finance Editor-in-Chief Andy Serwer in an episode of “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.
The company’s stock has dropped more than 59% this year but has risen over 7% since October 20, when Kohl’s announced a new strategy that shifts toward activewear and away from fashion.
The return of customers to Kohl’s stores amid the pandemic demonstrates the enduring desire for in-person retail, Gass said.
“They want to get out of the house, they want to engage, they want to discover product,” she says. “You know, discovering product online is different than discovering product in a store where you can just sort of see something and it captures your attention or your imagination.”
“There's still a human need to want to get out of your house and engage,” she adds. “Shopping, you know, that's sort of core to society.”
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