Women’s apparel usually doesn’t give retail chief executive officers much to talk about — except at Kohl’s this season.
“We’re especially excited by women’s, which outperformed the overall business,” said Kohl’s Corp. ceo Michelle Gass, as she heralded the chain’s apparel business, right after the company reported top and bottom-line second-quarter gains above expectations. “Men’s, women’s and children’s apparel all increased,” said Gass.
To further bolster women’s, Gass announced Kohl’s will introduce Nine West footwear, handbags and apparel beginning in July 2019. She also said the company is testing an expanded activewear format at several locations that have 40 percent increase in square footage for the category.
She’s particularly high on activewear, anchored by Under Armour, Nike and Adidas at Kohl’s. “National brands increased 4 percent driven by strength in apparel and footwear, largely due to active,” Gass said during a conference call. “Nike outperforms the company and our biggest brand, Under Armour, delivered strong growth. Adidas did good, too.” In addition, “Levi’s and Lee jeans did particularly well with the launch of our back-to-school campaign,” Gass said.
With proprietary brands, Gass cited a “sea change” in the performance, including Apt. 9, which was relaunched last fall. Proprietary brand sales have grown to represent roughly two-thirds of the women’s business.
On Tuesday, Kohl’s reported a 40 percent gain in net income to $292 million for the second quarter ended Aug. 4 compared with $208 million in the year-ago period. Total revenues rose 4 percent to $4.57 billion from $4.4 billion a year ago. Comparable sales gained 3.1 percent, marking the fourth consecutive quarter of comp-sales growth. Kohl’s stock rose about 1.5 percent to $80 on Tuesday.
The performance at the 1,100-unit Menomonee Falls, Wis.-based chain echoed those of other retailers — Nordstrom Inc., Walmart Inc., J. Jill Group Inc. and The TJX Cos. Inc. among them — which have all reported solid second-quarter results over the past week. Gap Inc. and New York & Co. are scheduled to report on Thursday, and Macy’s Inc. last week reported strong bottom-line gains and a small sales gain.
For Gass, it’s been a soft landing since she took on the ceo role in May, succeeding Kevin Mansell. The company is benefiting from several strategies launched during Mansell’s stewardship, such as Under Armour and bolstering private brands, though Gass, a former top Starbucks executive, did serve as chief merchandising and chief customer officer for three years before ascending to the top job.
Kohl’s has formed a “strategic partnership” with Authentic Brands Group, owner of Nine West, to sell footwear, handbags and outerwear, as well as a new women’s apparel collection beginning in July 2019 at all of its 1,100 stores and on kohls.com. The partnership “elevates Kohl’s offerings for women and Millennial customers….We admire the role Nine West has played in shaping the footwear industry and its success in becoming one of the most recognized and desired brands among female consumers, particularly Millennial customers,” said Doug Howe, Kohl’s chief merchandising officer.
Last month, Nine West Holdings Inc. sold its Nine West and Bandolino footwear and handbag businesses in a court auction to ABG for $340 million. Nine West filed for Chapter 11 bankruptcy court protection in April in a Manhattan bankruptcy court and plans to exit bankruptcy in September.
Other key exclusives sold at Kohl’s include LC Lauren Conrad, Simply Vera Vera Wang, Apt. 9, Popsugar, Circus by Sam Edelman, A:Glow maternity, Nike, Under Armour, Adidas, Levi’s and New Balance. “Proprietary brands had their best performance in over five years,” Gass said, citing traction due to speed-to-market.
Apparently, Kohl’s is doing more with less. The company cut inventory by 8 percent, focusing on fewer brands while getting more in-depth on key items.
The retailer is also advancing personalized marketing via product recommendations, savings alerts and notifications on top sellers; expanding its business on mobile; localizing inventory to better match customer demand; simplifying loyalty benefits, and in the early stages of rolling out mobile checkout and in-store lockers for online order pickup.
Another key strategy is right-sizing the stores, seen as a key driver to inventory productivity and improving margins. The company is working on subleasing space to complimentary neighboring businesses, but did not disclose any. “We are building a nice robust pipeline of interested parties,” said Gass.
Aside from strategies put in place recently, Kohl’s is benefiting from the strength of the U.S. economy and consumer confidence, not to mention the liquidation of The Bon-Ton Stores Inc. “Bon-Ton is typically located where our brand is particularly strong,” Gass said. “We are going to put marketing dollars strategically against those stores that are closing.”
With all that’s going on, Gass is “very confident” Kohl’s can obtain comp gains in the fourth quarter, on top of the comps posted in the year-ago fourth quarter. “We can comp the comp,” said the ceo.
Gass wasn’t very worried about the home business, which took a dip last quarter. Year-to-date, home is one the chain’s strongest categories, according to Gass. “When we see strength in apparel, sometimes home gives up a little bit. But there is nothing there that gives us great cause of concern. We are expecting a strong back half in home.”
Kohl’s could also be helped by toys in the back half. “We have a bit of a curated assortment in toys, but we are bringing in two brands, Lego and FAO Schwarz.”
The nine-month-old program with Amazon is being expanded. About 80 Kohl’s stores in the Los Angeles and Chicago markets accept Amazon returns for free and they can be package-less returns. Twenty-one stores in the Milwaukee market are being added to further the test.
“We are really pleased with the partnership,” Gass said. “We continue to track this very closely. Kohl’s is pretty famous for diving deep into the data and making sure we understand all aspects of the key metrics. It’s a big deal for us and a big deal for them.”