Menomonee Falls-based
Kohl’s Corp. reported a 5.2% decrease in net sales for the third quarter, but chief executive officer
Tom Kingsbury said the company’s efforts are setting the retailer up for success in 2024.
Net sales for the quarter were $3.84 billion.
“I’ve said many times, it takes times to build businesses,” Kingsbury said, stressing the company’s work to optimize its offerings and add new relevant products.
“As we’ve said before though, it will take some time for the full impact of our efforts to be realized,” Kingsbury said.
Same store sales were down 1% year-over-year in the third quarter but are up for the year. Digital sales decreased by 16.5% in the quarter. Kingsbury attributed the digital decrease to the decision earlier this year to eliminate online-only promotions in favor of an omnichannel pricing strategy.
"The digital business is really whats bringing us down,” Kingsbury said, describing 2023 as a time for rebuilding and repositioning the company. “We had some things we were doing online that was really not reflective of what an omni company would be doing. A lot of online-only pricing, etc. online pricing. And we felt that for our customers it was important that we have one view on pricing. Obviously in 2023 that hurt our digital business, but again, a lot of the actions we’ve taken will be behind us as we go into 2024. So again, I’m confident about the fact we are doing well in stores and I think it's going to be a good setup for 2024.”
Beyond the decrease in digital sales, Kingsbury attributed a portion of the sales decrease to unseasonably warm weather in the fall.
He said Kohl’s had a solid back-to-school season with sales tracking above expectations and while he didn’t want to blame the weather, there was a clear impact on demand for fall seasonal goods.
In particular, he pointed to a divergence in results across regions. The Midwest, Mid-Atlantic and Northeast, all impacted by warmer weather, were down in the low-to-mid-single digits while all other areas increased sales by low single digits.
At the bottom line, Kohl’s saw net income of $59 million for the quarter, down nearly 40% from last year.
Gross profit margins did improve 158 basis points to 38.9%.
Selling, general and administrative expenses, however, increased 1.9% to $1.36 billion.
Operating income for the quarter was $157 million, down from $200 million, leaving the company with an operating margin of 4%. Kohl’s has a long-term target for operating margin of 7-8%.
Inventory did decrease 13% in the quarter as the company “benefited from our new disciplines,” Kingsbury said. Kohl’s had previously targeted a mid-single digit decrease for the quarter.
Kohl's did adjust its full year guidance, now calling for sales to be down between 2.8% and 4%. The prior guidance called for a 2% to 4% decrease. The downward shift amounts to a roughly $137 million decrease in the best case outcome for the year and would put net sales around $16.68 billion for the year.
