Yahoo Finance Kohl's (KSS) Strategic Efforts & Sephora Tieup Aid Growth
Kohl's Corporation KSS is benefiting well from its strategic efforts. In the fourth quarter of fiscal 2022, the company announced some key priorities to drive top- and bottom-line growth. Also, the company’s solid partnership with Sephora bodes well.
Strategic Efforts: Key Factors
Kohl’s will be focusing on four key priorities in 2023 that will drive overall sales and profitability. These priorities include enhancing the customer experience, accelerating and simplifying its value strategies, managing inventory and expenses with discipline and strengthening its balance sheet. Management expects that successful execution across these priorities will unlock considerable long-term shareholder value.
To enhance its customer experience, Kohl’s is focusing on creating an exciting in-store experience, customer gifting and driving digital growth. It is also focusing on expanding and growing Sephora. To accelerate and streamline its value strategies, which is the company’s second priority, management is focusing on simplified pricing and greater consistency in its marketing efforts.
Other priorities include focusing on inventory control process, efficient marketing and planning inventory down in mid-single digits to increase its ability to chase demand. Also, to strengthen its balance sheet, management is enhancing its liquidity position and flexibility by reducing debt and capital spends.
Given its focus on key priorities, management expects 2023 operating margin of approximately 4.0%, up from 1.4% recorded in the year-ago period. Additionally, it projects adjusted earnings per share (EPS) in the $2.10-$2.70 range. The company incurred a loss of 15 cents per share in the year-ago period. Management also emphasized its long-term goals, which included a leverage target of 2.5X, low-single-digit sales growth, operating margin in the range of 7-8% and mid-to-high-single digit EPS growth.
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What Else is Driving Growth
Kohl’s is committed to strengthening ties with its strategic partners. Moving on these lines, the company announced plans to add 250 more Sephora locations at its stores in 2023. The said expansion will bring the total Sephora in-store footprint to Kohl’s 850 locations, in line with the initial goal of the Sephora at Kohl’s partnership.
The expansion helps Kohl’s enhance customer experience and deliver prestige beauty to its customers. The company highlighted that beauty brands presently found in Sephora at Kohl’s are witnessing gains from higher reach and a new customer base.
Management looks to expand Sephora at Kohl’s to all its 1,100-plus locations. In this regard, the company will open 50 smaller format Sephora stores by the end of the year. The remaining shops are likely to be rolled out by 2025.
We note that Sephora and Kohl’s partnership has been benefiting both parties. Management expects Sephora at Kohl’s to generate $2 billion in annual sales by 2025. The company highlighted that approximately 8 million Kohl’s customers bought beauty products at Sephora at Kohl’s and almost 50% of Sephora at Kohl’s baskets had additional category purchased during 2022.
In the fourth quarter of 2022, Kohl’s total beauty sales jumped 90%. The company saw high-single-digit percentage comparable beauty sales growth across 200 Sephora shops that started operations in 2021. Management witnessed better-than-expected beauty sales across 400 shops that started in 2022 along with persistent strong digital sales rise on Kohls.com.
Wrapping Up
Kohl’s experienced a tough macroeconomic environment in fourth-quarter fiscal 2022. Management stated that rising inflationary pressure continued to hamper consumer spending and business. These headwinds affected the company’s fiscal fourth-quarter results wherein both the top and bottom lines declined year over year.
However, the benefits mentioned above will most likely assist Kohl in overcoming such obstacles.
Shares of this Zacks Rank #3 (Hold) company have decreased 9.8% in the past six months against the industry’s growth of 1.6%.
3 Key Picks
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Kohl's Corporation (KSS) : Free Stock Analysis Report
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